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Any stock that does not pay dividends _has no fundamentals_. It's just supply / demand.

jbverschoor 6y ago
If nobody sells, any seller can charge ANY price they want. 1 trillion per share. When more is shorted than exists, you’re in a let good place to know that there’s no such thing as the last biggest fool.
- adolph 6y ago
  If nobody buys, does the trillion dollar seller make a sound?
  - jjeaff 6y ago
    Only if insolvency makes a sound. If the shorts don't have the trillion dollars to buy that stock to pay back the debt by the deadline then they are sol.
    - ericd 6y ago
      What deadline exists for shorts, assuming these aren't puts?
      - jbverschoor 6y ago
        Today was the monthly option expiration day. But of course not all options expire at the same time
      - joncrane 6y ago
        Shorting doesn't only mean short stock. You can be short call options, and if they are in the money, the holder of the contract can exercise his or her option, which forces the seller of the contract to provide shares at whatever price. For every long call option contract, there is a counterparty who is subject to unlimited upside price risk, just as a traditional stock shorter. The difference is the contract has an end date. I would argue that options account for more of the pressure/volatility of these recent stock prices than the shares themselves.
  - jbverschoor 6y ago
    If they sold a call option which is exercised, they’d HAVE to buy
lazyasciiart 6y ago
Is this still about GME (which does pay dividends) or just a random comment on the market in general?
reducesuffering 6y ago
Berkshire Hathaway? Do you understand the tax-reasons why a company would buy back shares instead of issue dividends? What about book value, where a company could have $1b in assets (real machinery, tractors, factories, etc), no debt, and no dividend? Does that mean it still has no fundamental value?
- Leherenn 6y ago
  A stock has value if someone ultimately can extract value from it. As far as I know, there are only 2 ways, dividend and gaining control of the assets. A stock where neither of both are possible ever (now and in the future) has no fundamental value since you have no way to extract value from it, it's pure speculation. Stock buybacks only have value because something else gives the stock value. Of course, I don't think the situation described above actually happens in the real world, dividends or ownership will (or at least can) happen at some point.
  - Hallucinaut 6y ago
    You missed lending the stock to others for an interest payment, and when there exists other market participants with a view the stock will be worth more than it currently is.
    - Leherenn 6y ago
      I don't think it ultimately gives inherent value to the stock, because you don't extract value from the company with this mechanism, but from others. Let's take a planet in another galaxy. I would argue the inherent economic value of this planet for a human on Earth is null. You cannot and there's no realistic time frame in which you would be able to extract value from owning it. And yet you could sell the ownership, lend it, ..., and make money. That doesn't give inherent value to the planet, it's just speculation.
  - jjeaff 6y ago
    You don't need to gain control of the assets. You just sell some of the stock for a profit as it rises (and only getting capital gains tax rates). This can be repeated ad infinitum assuming the underlying asset value grows indefinitely and the stock keeps splitting.
matthewbauer 6y ago
Some companies do buybacks that provide the same value as dividends - but avoid capital gains. Since there are less shares after the buyback, the remaining shareholders have relatively more value in the company.
deleted 6y ago
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andersonvieira 6y ago
This is wrong. All stock prices are supply and demand. Dividends are simply taking money from one pocket, the company you own shares, and putting into another, your bank account. What matters is that the company is capable of making cash and, ideally, of increasing that amount of cash with time. Dividends are just a capital allocation decision.

If nobody sells, any seller can charge ANY price they want. 1 trillion per share. When more is shorted than exists, you’re in a let good place to know that there’s no such thing as the last biggest fool.

adolph 6y ago
If nobody buys, does the trillion dollar seller make a sound?
- jjeaff 6y ago
  Only if insolvency makes a sound. If the shorts don't have the trillion dollars to buy that stock to pay back the debt by the deadline then they are sol.
  - ericd 6y ago
    What deadline exists for shorts, assuming these aren't puts?
    - jbverschoor 6y ago
      Today was the monthly option expiration day. But of course not all options expire at the same time
    - joncrane 6y ago
      Shorting doesn't only mean short stock. You can be short call options, and if they are in the money, the holder of the contract can exercise his or her option, which forces the seller of the contract to provide shares at whatever price. For every long call option contract, there is a counterparty who is subject to unlimited upside price risk, just as a traditional stock shorter. The difference is the contract has an end date. I would argue that options account for more of the pressure/volatility of these recent stock prices than the shares themselves.
- jbverschoor 6y ago
  If they sold a call option which is exercised, they’d HAVE to buy

lazyasciiart 6y ago

Is this still about GME (which does pay dividends) or just a random comment on the market in general?

reducesuffering 6y ago

Berkshire Hathaway? Do you understand the tax-reasons why a company would buy back shares instead of issue dividends? What about book value, where a company could have $1b in assets (real machinery, tractors, factories, etc), no debt, and no dividend? Does that mean it still has no fundamental value?

Leherenn 6y ago
A stock has value if someone ultimately can extract value from it. As far as I know, there are only 2 ways, dividend and gaining control of the assets. A stock where neither of both are possible ever (now and in the future) has no fundamental value since you have no way to extract value from it, it's pure speculation. Stock buybacks only have value because something else gives the stock value. Of course, I don't think the situation described above actually happens in the real world, dividends or ownership will (or at least can) happen at some point.
- Hallucinaut 6y ago
  You missed lending the stock to others for an interest payment, and when there exists other market participants with a view the stock will be worth more than it currently is.
  - Leherenn 6y ago
    I don't think it ultimately gives inherent value to the stock, because you don't extract value from the company with this mechanism, but from others. Let's take a planet in another galaxy. I would argue the inherent economic value of this planet for a human on Earth is null. You cannot and there's no realistic time frame in which you would be able to extract value from owning it. And yet you could sell the ownership, lend it, ..., and make money. That doesn't give inherent value to the planet, it's just speculation.
- jjeaff 6y ago
  You don't need to gain control of the assets. You just sell some of the stock for a profit as it rises (and only getting capital gains tax rates). This can be repeated ad infinitum assuming the underlying asset value grows indefinitely and the stock keeps splitting.

matthewbauer 6y ago

Some companies do buybacks that provide the same value as dividends - but avoid capital gains. Since there are less shares after the buyback, the remaining shareholders have relatively more value in the company.

deleted 6y ago

[deleted]

andersonvieira 6y ago

This is wrong. All stock prices are supply and demand. Dividends are simply taking money from one pocket, the company you own shares, and putting into another, your bank account. What matters is that the company is capable of making cash and, ideally, of increasing that amount of cash with time. Dividends are just a capital allocation decision.