The University of Cambridge’s wealthiest constituent college, Trinity College Cambridge, has decided to divest from all arms companies, Middle East Eye can reveal.
MEE has learnt from three well-informed sources close to Trinity’s student union that the college council, responsible for major financial and other decisions, voted to remove Trinity’s investments from arms companies in early March.
According to the sources, the college decided not to announce that it would divest from arms companies after an activist defaced a 1914 portrait of Lord Arthur Balfour - who authored the infamous Balfour Declaration - inside the college on 8 March.
So… the stock market is weird and isn’t the economy.
So, when people divest from a company the company doesn’t actually suffer at all (unless their employees are regularly given options which, in the greedy modern world, is a rarity). Instead, what happens, is the executives of the company suffer - C level employees are nearly always given either shares, options or stock performance based incentives. When we divest we aren’t hurting the ability for these companies to produce arms - we’re just annoying the executives (and we actually are since other investors don’t just rush to fill the void - more on that later). Pissing off these executives has almost no effect until it does - each divestor isn’t slightly damaging the executives… instead, once a large enough mass of people have divested they get hit hard - it’ll come in waves as the market corrects.
On the topic of investors rushing to fill the void - if you individually decide to divest… nobody cares, the market is a large pool of wealth. However, the only value of stocks comes from other people’s willingness to buy it (the stock market is, practically, just a large pyramid-scheme like thing)… if it becomes socially unacceptable to hold these stocks then the people holding them want to get rid of them - even if just a portion of the market refuses to interact with these securities then the pool of available buyers will shrink - number goes down is self fulfilling so more investors will be cautious about holding onto the stock so buy orders freeze up more… it can be a vicious cycle.
So… divestment doesn’t hurt companies, but enough of it might hurt C-level folks that they’ll decide that arms deals with Isreal aren’t worth losing their fifth house in the Hamptons over.
The stock value is a relevant metric to assess the credit worthiness of a company. Large profitable companies run a lot of their business on loans. In fact in order to achieve high profit margins it is encouraged as the return on investment is a margin of equity.
If you invest 100 dollar and you do business giving you back 110 dollar, you have a 10% margin.
If you invest 200 dollar, of which 100 are your equity and 100 are borrowed and you get back 220 dollars and pay 5% interest on the borrowed money, you have 15 dollars on your 100 dollar equity. Now your margin is 15%.
So many companies run a significant portion of their business on borrowed money. You hurt their ability to borrow, you hurt their business directly. And this can create a downward spiral. Loans get more expensive to margin gets smaller so more people divest so loans get more expensive…