As a young boy living in beautiful Yorba Linda, California, I felt like I had it all. A treehouse, swimming pool, horses and miles of open land surrounding our property on which to carry out endless childhood adventures. One such adventure was a lemonade stand my brother and I setup one day on the road outside our home. Though a busy four lane highway today, it was just a country lane when I lived there. We dutifully set up our table with plenty of paper cups and a big jug of lemonade. We had every element necessary for success, at least so we thought. For what seemed like hours, we sat talking and joking and throwing stones at the trees across the road while waiting for a car, any car, to pass by. Finally, we saw one approach and as it slowly passed by us its’ brake lights went on. It stopped and then backed up as our little entrepreneurial hearts leapt with excitement. As the man exited, he called out and asked, “Do you boys know where I can find a gas station near here?”
Disheartened, we packed up our supplies as my brother wisely opined, “I think we need a better location.” The deserted conditions that made Rose Drive perfect for playing tag and riding bikes, also made it a terrible place to run a retail business.
My family has long since left California, but I thought of this experience as I read in the investment news about yet another major technology company that has announced they are leaving California and moving their headquarters to Texas. The reasons stated for the move included California’s anti-job policies, high taxes, an aggressive regulatory environment and undependable energy sources, to mention a few. This was just one in a long list of companies in recent years who have fled states with burdensome regulations and high taxes in favor of a more business friendly environment.
These moves make interesting stories that people read then forget about, but I wonder how many have seriously considered the impact to investors. On the face of it one must consider that such a significant business move would come at a pretty high cost, and a company would only take such drastic measures if it was determined to be in their best long-term interests. In other words, as a former lemonade stand owner myself, you only move the stand if you feel a different location will lead to higher profits.
I would suggest that investors might want to pay closer attention to these types of relocation announcements, which are becoming increasingly more common. If in fact a company can move to a new state and end up with lower operating costs and a more favorable regulatory environment, one could expect that increased profits, and higher stock prices, may follow. As my lemonade selling days taught me, location is everything.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 375 E Riverside Dr, St. George, UT 84790
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