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Red Hat Is Now Part of the S&P 500
phantomfive writes "Red Hat has made it onto the S&P 500, an important measure of the stock market. It is replacing CIT, which is expected to go bankrupt after the government refused to bail them out. Red Hat is the first Linux company to make it on to the S&P 500. While this means little directly for the company, it is an indication of the importance Linux is taking on in the world."
Owning Red Hat stock doesn't make linux happen. When you (or the index fund) buys RHAT stock, that money goes to the previous shareholder, NOT Red Hat.
Do you even lift?
These aren't the 'roids you're looking for.
Congrats on Red Hat reaching the big league. I've got a couple of mates who work for Red Hat, and they say business is booming in the downturn, because they're picking up a lot of business from people looking to save money through Red Hat's Open Source-plus-support way of doing things. I wish Red Hat luck.
Sadly, this doesn't seem to have been the case with CIT, whose criminally incompetent management decided that letting the Government bail them out, was a better business plan than running their business as a going concern.
Too bad Anglo-American culture is far too tolerant of failure, particularly in the business world. The fat cats need to be taken down a few pegs -- and serious repercussions for failure are needed.
The big problem with the government bailouts on both sides of the pond, is that the captains of industry are scum, by and large; and will find a way to be "too big to fail", and profit by bludging off people who pay their taxes and do the right thing. Thankfully, the chaps in charge in the US have let CIT fail. After all, private business are full of people who preach the benefits of free markets in the good times. The Obama administration are wise enough to allow them to be destroyed by the remorseless logic of the free market when they are too weak to survive.
Owning Red Hat stock doesn't make linux happen. When you (or the index fund) buys RHAT stock, that money goes to the previous shareholder, NOT Red Hat.
That is true, but there are tangible benefits to RHAT. One of the ways they can raise capital is to issue additional shares. An increase in the stock price means that they can raise more money when they do this. This also makes the stock options that are offered to employees more valuable without costing the company a cent.
It also protects the company from a hostile takeover since any buyout becomes more expensive.
Not directly. But as more people buy stock in RHAT it means that Red Hat will be a more viable business and more people will put money into it. So indirectly Red Hat does get money.
Having a high stock price does not mean you have a viable business. Please remember the dotbomb bubble. Many businesses had completely ridiculous business plans yet their stock went through the roof. Then they ran out of money and the stock certificates were about as valuable as scratchy toilet paper.
I'm not saying this is true of RedHat, but PLEASE don't equate a high stock price with a viable business. If anything, a high stock price equates with the mere perception that the business is viable.
Help I'm a rock.