Updated: Aug 20, 2019
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The tweet(s) that inspired the article-
We‘ll be clear about what the lies are in these statements, but first, the truths.
Yes, the entire Walton family is worth around $175 billion. That net worth will get them inside the top 20 of the richest people to ever exist. Let’s not forget that in today’s money, John D Rockefeller was worth twice as much just by himself.
The lie is within the implications of Bernie Sanders’ statements. By reading his posts or listening to him speak, you would assume that the Walton‘s have been reaping massive cash profits yearly from the company, leaving little money to be paid out to the lowly workers.
In reality, of the Walton family’s $175 billion in “net worth,” $160 billion of it is in their 50.8% ownership of Walmart.
So what is the point in weaving together the value of the ownership (in shares) of the company, and the money that the workers are paid?
The point is that it’s a beautiful play on your emotions. In reality, the value of the company has zero bearing on what the workers are paid.
We‘ve done these calculations in numerous videos before, but since they price everything so cheap, Walmart only maintains a 1.8% profit margin. Meaning there are not just loots of cash lying around all over the place. Actually, Walmart only has around $50 billion in cash total.
Side note: There is no tie between the profits a company makes, and the perceived value of the corporation. Take Uber, Twitter, Tesla, Snapchat, and about 5,000 other companies as examples. Uber is not making any profit, and has publicly stated that they don't know if they will ever become profitable, but their company is valued around $70 billion by the stock market.
The point? Talking about ownership in stock being "worth" a certain amount of money is rarely tied to the profits earned by the company. It's all speculation in a perceived value. Click here for a list of notable companies that haven't made a profit.
There's a difference between “Net Worth” and “Liquid Cash.”
We see this all the time, but I’ll use two common examples. “Jeff Bezos is worth $150 billion,” and “The Waltons are worth $175 billion.”
The facts on both of these examples are pretty clear. 90% of Jeff Bezos’ net worth is in Amazon stock, and 90% of the Walton’s worth is in Walmart stock.
This means that each may have no more than $10-15 billion on-hand (Hard times, right..).
I know what you’re thinking... “But, they can just sell their stock and then they have all that money, so it’s the same thing!” My response would be a resounding “No they can’t, and no it’s not.”
They can’t sell their shares unless there is a massive buyer lined up to take the shares off their hands. In this case, you’re talking about the richest person in the world, so who do you think is lined up to buy his entire net worth? That thinking defies the logic of him having more money than anyone else.
If either the Walton's, or Bezos put their shares on the open market, the share price would plummet.
Why? Because when you flood the market with supply, it’s going to decrease to the point that it becomes equal with the demand.
Right now a Michael Jordan rookie card would go for $20,000. There are more people that want them than there are cards available. If tomorrow someone opened up a box in their attic and found a million MJ rookie cards, the price per card would go through the floor. Having a supply greater than the demand will lower the perceived value of the cards.
Now sub in the millions of shares owned by the Walton's for the rookie cards. Right now at the current market value, those shares are “worth” $105 per share. If they flood the market with more shares than the demand can meet, the price will decrease, making their shares close to worthless.
Okay- we see the difference in net worth in stock ownership vs. liquid cash. What about the poor workers though? There has to be some injustice in the Walton's being worth $175 billion and the workers barely making enough money to get by.
Lets see if dissolving the Walton's net worth would help the workers in any way at all.
The Walton's hold around 1.5 billion shares of Walmart stock, representing a 50.8% ownership in the company. Let’s pretend they cared what Bernie Sanders thinks, and decided to give those shares to the 2.2 million Walmart employees. This is going to be around 680 shares to each employee.
680 shares of Walmart is no joke. At today’s value that represents about $68,000. Key words: “At today’s value.”
Removing the majority shareholders from one of the worlds biggest companies is going to send an unsettling shock wave throughout the rest of the companies shareholders. In uncertain times, a majority of the remaining owners are likely to dump their shares in search of a more stable situation.
Even at conservative estimates, we’d end up with shares worth 50% of the original price. That’s extremely conservative.
So now we've given each of the workers $34,000. That’s still a big chunk of money for people who are living paycheck to paycheck. There’s only one problem- That $34,000 is in stock ownership, not liquid cash. Meaning that even though the workers “net worth” is $34,000, they actually have zero available cash. Remember that point about the Walton's net worth being mostly stock ownership, not liquid money?
If they want to cash out that big payday they're going to need to put the shares out on the open market. Can anyone guess which direction the value of the shares will go if all 1.5 billion shares are dumped on the open market? That’s another massive decline in share price.
So even if each employee gets $25,000 from their shares, or $21,000 after capital gains taxes, now what? They each have $21,000 and work for a company that’s just been thrown into chaos by losing its former 51% owners.
After the $21,000 is spent, what problem did we solve?
The workers still work for a business that makes a 1.8% profit margin, and it’s probably heading downhill now that the stock price has crashed.
At the end end of the day the point Bernie Sanders uses about the Walton's is completely without merit. The net worth of the Walton's has no effect on what the workers at Walmart are paid, because the net worth comes from their ownership of shares in the company- not payouts from the companies profits.
As usual, this is nothing more than political slight of hand from one of today's greatest tricksters, Bernie Sanders.