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The TLDR for people who don't intuitively understand why: existing shareholders are diluting their stake in the company by issuing new shares and getting money

The TLDR for people who don't intuitively understand why: existing shareholders are diluting their stake in the company by issuing new shares and getting money for those new shares. It's simply selling part of the company. Not profit.

intuitionist 5mo ago
Worth also pointing out though that if you can sell new shares above intrinsic value that is accretive to existing shareholders. Dilution isn’t always a bad word. (It’s bad for the people buying new shares.)
- skrbjc 5mo ago
  Basically a ponzi at that point
  - gruez 5mo ago
    Bubble? Yes. Ponzi? No. The latter requires some element of deception/fraud. Strategy Inc. (formerly MicroStrategy) was basically something similar. They had $x worth of bitcoin in a vault, but were selling themselves for $2x.
    - arcticbull 5mo ago
      Well they are raising capital to hand out in dividends on their preferred stock. So that's much closer.
- CobrastanJorji 5mo ago
  Well, partly it's an audience thing. Hacker News has a lot of folks who work at tech startups, and if you work at a tech startup, dilution is nearly always a very bad word for you.
  - rahimnathwani 5mo ago
    If you work at a tech startup then you probably hope your company raises an additional round of funding, i.e. you hope you get diluted.
    - LtdJorge 5mo ago
      Isn’t that done with already existing shares (from the founders)? Then it wouldn’t be dilution.
      - rahimnathwani 5mo ago
        No. The main purpose of a funding round is for the company to sell shares and receive cash (e.g. to spend on marketing), not for founders to sell shares and receive cash (e.g. to spend on Ferraris). (Sometimes, at the same time as a funding round, founders may also sell some existing shares to the new investors.)
- mcmoor 5mo ago
  Yeah I'm also always confused whenever I heard that a company issues new stocks. Why would existing shareholders agree for that? If there's more comprehensive resources about this I'd love to read it.
ball_of_lint 5mo ago
You're conflating two things here. Yes, in 2021 GameStop did sell shares to raise cash in a dilutive way. [1] No, that is not being treated as profit or revenue. Gamestop had ~418 million in profit in 2025. [2] A fraction of that profit does come from interest income. Ignoring that (say to value the business separate from the cash) they still made ~110 million in profit. In my personal opinion (not financial advice) Gamestop with the cash it has today is a much more attractive investment than without. If you have worries about an economic downturn, it's a hedge. If you worry about GameStop being able to maintain it's current revenue/profit or volatility, it's runway. There's a variety of ways it reduces the risk of an investment. [1] https://investor.gamestop.com/news-releases/news-details/2021/GameStop-Completes-At-The-Market-Equity-Offering-Program-06-22-2021/default.aspx https://investor.gamestop.com/news-releases/news-details/202... [2] https://www.sec.gov/Archives/edgar/data/1326380/000132638026000013/gme-20260131.htm https://www.sec.gov/Archives/edgar/data/1326380/000132638026... page 27 has the consolidated results.
- sanswork 5mo ago
  >A fraction of that profit does come from interest income. More than half of it came from interest income. Gamestop has been unable to grow revenue since Cohen took over, failed initiative after failed initiative. The only thing saving them is their meme stock nature and a legion of people willing to throw good money after bad allowing them to dilute shareholders to build a warchest. They have increased profit by closing something like 50% of their stores but you can't grow a retail company by constantly closing stores at some point you have to find a way to make the stores more profitable and in 5 years with tons of different attempts they've not found that. Revenue is down almost 50% in the past 3 years. Having a pile of cash doesn't matter if you have a leader who has no good ideas for how to invest it to improve returns for shareholders, all it does is allow you to die for longer.
  - ball_of_lint 5mo ago
    Well hey, what do you think about them buying eBay? eBay seems to think a lot of the value is in verification - grading cards, authenticating watches, shoes, handbags. GameStop has a similar business in collectibles and could provide eBay with a physical footprint that would let a lot of that verification happen easier, in-store.

intuitionist 5mo ago

Worth also pointing out though that if you can sell new shares above intrinsic value that is accretive to existing shareholders. Dilution isn’t always a bad word. (It’s bad for the people buying new shares.)

skrbjc 5mo ago
Basically a ponzi at that point
- gruez 5mo ago
  Bubble? Yes. Ponzi? No. The latter requires some element of deception/fraud. Strategy Inc. (formerly MicroStrategy) was basically something similar. They had $x worth of bitcoin in a vault, but were selling themselves for $2x.
  - arcticbull 5mo ago
    Well they are raising capital to hand out in dividends on their preferred stock. So that's much closer.
CobrastanJorji 5mo ago
Well, partly it's an audience thing. Hacker News has a lot of folks who work at tech startups, and if you work at a tech startup, dilution is nearly always a very bad word for you.
- rahimnathwani 5mo ago
  If you work at a tech startup then you probably hope your company raises an additional round of funding, i.e. you hope you get diluted.
  - LtdJorge 5mo ago
    Isn’t that done with already existing shares (from the founders)? Then it wouldn’t be dilution.
    - rahimnathwani 5mo ago
      No. The main purpose of a funding round is for the company to sell shares and receive cash (e.g. to spend on marketing), not for founders to sell shares and receive cash (e.g. to spend on Ferraris). (Sometimes, at the same time as a funding round, founders may also sell some existing shares to the new investors.)
mcmoor 5mo ago
Yeah I'm also always confused whenever I heard that a company issues new stocks. Why would existing shareholders agree for that? If there's more comprehensive resources about this I'd love to read it.

ball_of_lint 5mo ago

You're conflating two things here. Yes, in 2021 GameStop did sell shares to raise cash in a dilutive way. [1] No, that is not being treated as profit or revenue. Gamestop had ~418 million in profit in 2025. [2] A fraction of that profit does come from interest income. Ignoring that (say to value the business separate from the cash) they still made ~110 million in profit. In my personal opinion (not financial advice) Gamestop with the cash it has today is a much more attractive investment than without. If you have worries about an economic downturn, it's a hedge. If you worry about GameStop being able to maintain it's current revenue/profit or volatility, it's runway. There's a variety of ways it reduces the risk of an investment. [1] https://investor.gamestop.com/news-releases/news-details/2021/GameStop-Completes-At-The-Market-Equity-Offering-Program-06-22-2021/default.aspx https://investor.gamestop.com/news-releases/news-details/202... [2] https://www.sec.gov/Archives/edgar/data/1326380/000132638026000013/gme-20260131.htm https://www.sec.gov/Archives/edgar/data/1326380/000132638026... page 27 has the consolidated results.

sanswork 5mo ago
>A fraction of that profit does come from interest income. More than half of it came from interest income. Gamestop has been unable to grow revenue since Cohen took over, failed initiative after failed initiative. The only thing saving them is their meme stock nature and a legion of people willing to throw good money after bad allowing them to dilute shareholders to build a warchest. They have increased profit by closing something like 50% of their stores but you can't grow a retail company by constantly closing stores at some point you have to find a way to make the stores more profitable and in 5 years with tons of different attempts they've not found that. Revenue is down almost 50% in the past 3 years. Having a pile of cash doesn't matter if you have a leader who has no good ideas for how to invest it to improve returns for shareholders, all it does is allow you to die for longer.
- ball_of_lint 5mo ago
  Well hey, what do you think about them buying eBay? eBay seems to think a lot of the value is in verification - grading cards, authenticating watches, shoes, handbags. GameStop has a similar business in collectibles and could provide eBay with a physical footprint that would let a lot of that verification happen easier, in-store.