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> Is there a limit to how many shares a company can issue? No, a board can technically issue shares unto infinity. There is no guarantee of scarcity, no guarant

> Is there a limit to how many shares a company can issue? No, a board can technically issue shares unto infinity. There is no guarantee of scarcity, no guarantee they will not raise more money. The scarce asset is the company, not the shares. Yes, they can issue more shares, but those shares still represent the same company plus the new investment money raised by raising the shares. They're not creating more company out of thin air when they issue more shares. EDIT: To clarify some misconceptions in the comments below: When a company sells more shares into the market they are not simply diluting away existing shareholders. The keyword is that they are selling shares, meaning they take money in exchange for shares. The company's value increases by the amount of money they take in exchange for the sale. Example: If a company is worth $1,000,000 and has 1,000,000 shares outstanding, each share is worth $1. If the company decides to sell another 100,000 shares and the market buys them at $1/each, there are now 1,100,000 shares outstanding and the company is now worth $1,100,000 because they took in $100,000 of cash via share sales. Existing shareholders have not lost any money or value.

blackearl 6y ago
It doesn't matter if it represents the company because the thing that shareholders care about is how much $ each share represents. This is why a stock will tank when a company talks about diluting their existing shares by creating new shares out of thin air. What you're talking about would be more akin to a stock split.
- PragmaticPulp 6y ago
  When a company sells more shares, they money they raise from selling those shares contributes to the value of the company. If a company sells 100,000 shares at a dollar each, the company is now worth $100,000 more because they now have another $100,000 on their balance sheet. No value is lost in this process. > This is why a stock will tank when a company talks about diluting their existing shares by creating new shares out of thin air. Companies can't just declare that more shares exist and dilute away shareholders like you said. They either issue them as stock based compensation, which is an expense, or they sell the shares to buyers, which means money goes toward their bottom line.
  - blackearl 6y ago
    Value is lost to existing shareholders who have the value of their shares diluted. Everything you're saying may seem logical, but economics is often illogical and any 1:1 $:stock sales still tank the share price.
    - PragmaticPulp 6y ago
      > Value is lost to existing shareholders who have the value of their shares diluted. You're confusing percentage dilution with absolute diluation. The shares represent the value of the company. The value of the company has increased by the amount of money raised. Each share represents a lower percentage of the company, but this is offset by the fact that the value of the company has increased by the amount of money raised. The shares have not been diluted on an absolute value scale. Owning 10% of a company worth $1mm is the same value as owning 5% of a company worth $2mm. If you own 10% of a $1mm company that raises another $1mm by selling more shares, you now own 5% of a 2mm company. Your percentage ownership is diluted, but your value has not been stolen. This is basic pre- and post-investment math. Shareholders are diluted on a percentage basis, but not on an absolute basis.
      - doggosphere 6y ago
        Assuming all shares are equal in class, voting power is diluted.
      - blackearl 6y ago
        You continue to make a 1:1 assumption. Dilution can cause the stock to go down because of FUD of financial health. It can go up because of strong leadership and optimistic futures. It's not occurring in a vacuum where $1 is 1 share and +$1 to company worth.
        Spivak 6y ago
        Yes but a company doing something that causes the market to value shares less isn’t dilution. The fact that you know how the market will respond to companies raising capital by issuing new shares doesn’t change the legality of it.
doggosphere 6y ago
OP was responding about stocks being just as much "multi level marketing" because you still need someone to sell the shares to, someone willing to pay more for it than you did. So it is actually irrelevant to scarcity or "intrinsic value".
chrisco255 6y ago
> but those shares still represent the same company plus the new investment money raised by raising the shares. No. Your shares were _diluted_ by the company issuing new shares. Now your 100 shares are worth half as much. Shares have predicted forward value embedded in their valuation. When you buy a share, you're betting that company will continue to grow. If it's having to raise money and issue new stock, odds are it's struggling with cash on hand. Maybe the bet will work out for you. Maybe not. Stocks are gambling, though, don't let yourself believe otherwise.
- PragmaticPulp 6y ago
  > No. Your shares were _diluted_ by the company issuing new shares. Now your 100 shares are worth half as much. That's not correct. A company sells shares in exchange for cash. That cash is owned by the company, which is represented by the shares. Companies can't simply dilute away their shareholders like you're suggesting. The money raised by selling shares doesn't simply disappear.
  - doggosphere 6y ago
    I own 10% of a company. Several rounds later, I now own 2% of the company. It is possible the company is now valued higher or lower than what I got in at. Did I get diluted?
    - XorNot 6y ago
      The concept of "non-voting shares" exists, so the answer is "maybe, depending what you value".
  - chrisco255 6y ago
    > Companies can't simply dilute away their shareholders like you're suggesting. The money raised by selling shares doesn't simply disappear. Yes, they can and yes they do, all the time. That's not only precisely how VC funding works in the early stages of a startup raising seed money and subsequently doing Series A, B, etc. that's also how public financing works via new share offerings on a public marketplace like NYSE or NASDAQ. GameStop is about to do precisely this very thing: https://abcnews.go.com/Business/wireStory/gamestop-finally-announces-share-sale-76876203 https://abcnews.go.com/Business/wireStory/gamestop-finally-a... The cash they receive has no forward value. $1 will be worth $1 in 10 years. When you buy shares, you are betting on future value. When a company trades new shares for cash, it is trading some portion of its future value for cash today. Not only that, but the cash on hand can disappear rather quickly (after all, they are raising it to spend it) depending on the company's expenditures, cost of new customer acquisition and whether its growth strategy is working or not. Also, shareholders are the last to be compensated in the event of a bankruptcy or liquidation. Bondholders take preference.
OneLeggedCat 6y ago
> EDIT: To clarify some misconceptions in the comments below: When a company sells more shares into the market they are not simply diluting away existing shareholders. HAHHAHHAHHHAHAAAA come on man.

blackearl 6y ago

It doesn't matter if it represents the company because the thing that shareholders care about is how much $ each share represents. This is why a stock will tank when a company talks about diluting their existing shares by creating new shares out of thin air. What you're talking about would be more akin to a stock split.

PragmaticPulp 6y ago
When a company sells more shares, they money they raise from selling those shares contributes to the value of the company. If a company sells 100,000 shares at a dollar each, the company is now worth $100,000 more because they now have another $100,000 on their balance sheet. No value is lost in this process. > This is why a stock will tank when a company talks about diluting their existing shares by creating new shares out of thin air. Companies can't just declare that more shares exist and dilute away shareholders like you said. They either issue them as stock based compensation, which is an expense, or they sell the shares to buyers, which means money goes toward their bottom line.
- blackearl 6y ago
  Value is lost to existing shareholders who have the value of their shares diluted. Everything you're saying may seem logical, but economics is often illogical and any 1:1 $:stock sales still tank the share price.
  - PragmaticPulp 6y ago
    > Value is lost to existing shareholders who have the value of their shares diluted. You're confusing percentage dilution with absolute diluation. The shares represent the value of the company. The value of the company has increased by the amount of money raised. Each share represents a lower percentage of the company, but this is offset by the fact that the value of the company has increased by the amount of money raised. The shares have not been diluted on an absolute value scale. Owning 10% of a company worth $1mm is the same value as owning 5% of a company worth $2mm. If you own 10% of a $1mm company that raises another $1mm by selling more shares, you now own 5% of a 2mm company. Your percentage ownership is diluted, but your value has not been stolen. This is basic pre- and post-investment math. Shareholders are diluted on a percentage basis, but not on an absolute basis.
    - doggosphere 6y ago
      Assuming all shares are equal in class, voting power is diluted.
    - blackearl 6y ago
      You continue to make a 1:1 assumption. Dilution can cause the stock to go down because of FUD of financial health. It can go up because of strong leadership and optimistic futures. It's not occurring in a vacuum where $1 is 1 share and +$1 to company worth.
      - Spivak 6y ago
        Yes but a company doing something that causes the market to value shares less isn’t dilution. The fact that you know how the market will respond to companies raising capital by issuing new shares doesn’t change the legality of it.

doggosphere 6y ago

OP was responding about stocks being just as much "multi level marketing" because you still need someone to sell the shares to, someone willing to pay more for it than you did. So it is actually irrelevant to scarcity or "intrinsic value".

chrisco255 6y ago

> but those shares still represent the same company plus the new investment money raised by raising the shares. No. Your shares were _diluted_ by the company issuing new shares. Now your 100 shares are worth half as much. Shares have predicted forward value embedded in their valuation. When you buy a share, you're betting that company will continue to grow. If it's having to raise money and issue new stock, odds are it's struggling with cash on hand. Maybe the bet will work out for you. Maybe not. Stocks are gambling, though, don't let yourself believe otherwise.

PragmaticPulp 6y ago
> No. Your shares were _diluted_ by the company issuing new shares. Now your 100 shares are worth half as much. That's not correct. A company sells shares in exchange for cash. That cash is owned by the company, which is represented by the shares. Companies can't simply dilute away their shareholders like you're suggesting. The money raised by selling shares doesn't simply disappear.
- doggosphere 6y ago
  I own 10% of a company. Several rounds later, I now own 2% of the company. It is possible the company is now valued higher or lower than what I got in at. Did I get diluted?
  - XorNot 6y ago
    The concept of "non-voting shares" exists, so the answer is "maybe, depending what you value".
- chrisco255 6y ago
  > Companies can't simply dilute away their shareholders like you're suggesting. The money raised by selling shares doesn't simply disappear. Yes, they can and yes they do, all the time. That's not only precisely how VC funding works in the early stages of a startup raising seed money and subsequently doing Series A, B, etc. that's also how public financing works via new share offerings on a public marketplace like NYSE or NASDAQ. GameStop is about to do precisely this very thing: https://abcnews.go.com/Business/wireStory/gamestop-finally-announces-share-sale-76876203 https://abcnews.go.com/Business/wireStory/gamestop-finally-a... The cash they receive has no forward value. $1 will be worth $1 in 10 years. When you buy shares, you are betting on future value. When a company trades new shares for cash, it is trading some portion of its future value for cash today. Not only that, but the cash on hand can disappear rather quickly (after all, they are raising it to spend it) depending on the company's expenditures, cost of new customer acquisition and whether its growth strategy is working or not. Also, shareholders are the last to be compensated in the event of a bankruptcy or liquidation. Bondholders take preference.

OneLeggedCat 6y ago

> EDIT: To clarify some misconceptions in the comments below: When a company sells more shares into the market they are not simply diluting away existing shareholders. HAHHAHHAHHHAHAAAA come on man.