With a daily budget of only $2.00, and a maximum cost per click (CPC) of $0.05, Company 1 isn't going to gain very much. Obviously. Nor are they risking losing much either.
But potentially they might gain forty customers a day, for only $2. Potentially.
After seeing a reasonable level of interest in their ads, Company 1 start to realise that they're being held back by their daily budget and low CPC, so they cautiously increase their bids, and open up the daily budget to $4.00, and then to $5.00.
By this point, they're reasonably confident that they can't lose, as they're only paying for each click anyway.
They're wrong.