Who creates wealth: promoters or investors? Samira Arora’s tweet sparks debate

He added, “Promoters are responsible for E and investors decide on P/E. Since speculation, hype, despair reflects more in P/E it is indeed the investors who decide whether to make promoter rich or not.” Where E is for earnings the company makes and P/E is the valuation that the market assigns to the stock.

This is in reference to the formula for P=P/E x E, where P is the price. It is a formula many investors including the Big Bull Rakesh Jhunjhunwala hold sacred.

The post was countered with a few, indignant responses.

A comment stated, “Sir, please don’t mislead retail investors stating that investors make promoters rich. Promoters have to first take risk, put their savings, work hard to earn good growing E for a longer period. After that only investors give multiple to that annual E.”

To this, Arora replied that wealth comes from P/E. He stated, “Question is how much multiple (or P/E). There is difference between being rich and wealthy- wealth comes from multiple, rich comes from earnings.”

Also read: Samir Arora sends up finfluencers’ disclaimers on stock-tips: “What’s left… management’s janam patri?”

Then another comment pointed out that the promoter has to work hard to maintain the earnings. It stated, “Earnings are to be maintained, he has to work hard, to achieve, so he deserves it na (sic)”.

Arora reposted it with what seemed like a tongue-in-cheek comment: “U have to give credit to the humbleness of twitter crowd. If I say we make the promoters  wealthy, there are so many people trying to defend the promoters.”

He added, “Hats off.”