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If a business is in a liquidity crunch because they’re shut down and may go bankrupt, their stock is....basically worthless. I don’t think you’ve thought this o
by graeme 7y ago
If a business is in a liquidity crunch because they’re shut down and may go bankrupt, their stock is....basically worthless. I don’t think you’ve thought this one through.
- anonuser123456 7y ago>I don’t think you’ve thought this one through. Firms are priced based in the long term future profits. By injecting capital immediately, the firms liquidity problems are resolved. It sounds like you've never heard of convertible preferred shares. Or maybe you have and haven't thought this one though?
- graeme 7y agoActually you’re right, that should work for businesses with shares. If people are willing to invest. But how would this work in a liquidity crunch? That was the situation we were in. Everyone was moving to cash. What about non-incorporated businesses? That’s the bulk of small business ordered to shut down.
- klipt 7y agoIf they're worthless, then after the government bails them out, the government should own them. If the government doesn't want to keep ownership, then redistribute the shares to taxpayers (aka "the people") as helicopter money.