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>But it is obviously bullshit, as the real companies behind some stocks have a real value. Like for example they might own a building that is worth one billion

>But it is obviously bullshit, as the real companies behind some stocks have a real value. Like for example they might own a building that is worth one billion dollars (simple example). If you take away all the stock market shenanigans, you still own part of that building via your stocks. But as a stock holder even of a public company, your shares can get diluted to smithereens when they issue new shares to raise money. For a laugh check out the chart of Helios and Matheson, the MoviePass company that had a fly by night stock spotlight experience a couple of years ago. It's so diluted, the historical price looks like the stock was worth bazillions in the past chart numbers.

criticaljudge 6y ago
I'm not an expert on that, but how can companies simply issue new stock? Why wouldn't they simply issue billions of shares and dilute everybody else to nothing? (Except for the loss of trust, meaning they would only be able to do that once)? Can they simply issue new stock in any way and amount they want?
- mancerayder 6y ago
  I don't know the legal specifics but they absolutely can, and do, all the time. It makes the stock sink so it's not something you do uncalculated, but struggling or new companies do this all the time. It's a way to raise capital in the public markets. If people believe in your growth, they'll go along and you might not crash too badly after dilution. And yes, some dilute and pay their executive team handsomely year over year.
- ac29 6y ago
  Companies issue stock all the time. Ideally, if a company issues, say, $1B in stock, its so they can use that money on projects that will return >$1B in value. In that case, everyone's happy because the dilution in shares in more than counteracted by the increase in revenue. There are limits - I would assume the SEC has the ability to approve or deny new issuance of shares. If you have 1 million outstanding shares, they would probably frown upon a filing to issue 1 billion more shares.

criticaljudge 6y ago

I'm not an expert on that, but how can companies simply issue new stock? Why wouldn't they simply issue billions of shares and dilute everybody else to nothing? (Except for the loss of trust, meaning they would only be able to do that once)? Can they simply issue new stock in any way and amount they want?

mancerayder 6y ago
I don't know the legal specifics but they absolutely can, and do, all the time. It makes the stock sink so it's not something you do uncalculated, but struggling or new companies do this all the time. It's a way to raise capital in the public markets. If people believe in your growth, they'll go along and you might not crash too badly after dilution. And yes, some dilute and pay their executive team handsomely year over year.
ac29 6y ago
Companies issue stock all the time. Ideally, if a company issues, say, $1B in stock, its so they can use that money on projects that will return >$1B in value. In that case, everyone's happy because the dilution in shares in more than counteracted by the increase in revenue. There are limits - I would assume the SEC has the ability to approve or deny new issuance of shares. If you have 1 million outstanding shares, they would probably frown upon a filing to issue 1 billion more shares.