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Stock is not cash. You can't sell it at the current value price. You can't even sell 0.1% of it without driving the price to zero. The liquidity is just not tha

Stock is not cash. You can't sell it at the current value price. You can't even sell 0.1% of it without driving the price to zero. The liquidity is just not that large.

skuhn 12y ago
Consider that if I have a bunch of gold bars sitting in a vault somewhere, I don't have to sell them to make money off of them. I can borrow money against their perceived value, currently practically for free. This becomes particularly interesting if I can buy $100 of gold bars for $50. Even if I can't sell them, I can use them to my advantage.
- imaginenore 12y ago
  Where can you possibly borrow $22 billion with stock as the collateral?
  - theworst 12y ago
    Acquisitions with much of the purchase being done in stock. My understanding is that this is very common.
    - imaginenore 12y ago
      Even if your understanding was true, it still supports my original statement - stock is not cash, and you can't easily get much cash for it on the scale of tens of billions.
      - theworst 12y ago
        The first part of your sentence makes it sound like you strongly disagree with my understanding. Can you elaborate? My point wasn't that you can turn stock into cash, but that you can turn stock into some of the same things that large amounts of cash might be used for -- acquisitions.
harryh 12y ago
Alibaba sold a hell of a lot more than 0.1% of itself today. About 125 times that number. And the price wasn't driven to zero. There's a lot more depth in US equities markets than you think.
- imaginenore 12y ago
  IPO is a special event. You can't compare it to a regular stock state.
  - arfliw 12y ago
    You are technically correct that you can't just login to your broker one day and dump 5% onto the market - but there are ways to sell that amount of stock without crashing the price. A Secondary Offering is one way. It's basically doing an IPO over again but for an already public company. You can also sell directly to hedge funds/mutual funds etc. They have the opposite problem, wanting to acquire a large stake but being unable to because submitting an order for 0.1% would send the price to infinity.
  - harryh 12y ago
    1) First off, what's so different about an IPO? The road show? Please. Investors aren't plunking down ~20B for a piece of Alibaba 'cause of a slick powerpoint presentation. 2) Secondly, companies routinely do secondary sales in which they sell stakes of themselves far in excess of 0.1%.
    - adventured 12y ago
      Secondary offerings are not routine for any given business, even if they occur regularly in the broad market among thousands of companies. It's rare for a company to do a secondary offering.
- malchow 12y ago
  "There's a lot more depth in US equities markets than you think." That's a keeper! Liquidity is a high-velocity component to markets. There's more depth that the sub-OP credits the market with at the present instant. But it really can disappear fast. I think there's actually a lot less depth to US equities than most people think, over the long run.

Stock is not cash. You can't sell it at the current value price. You can't even sell 0.1% of it without driving the price to zero. The liquidity is just not that large.

skuhn 12y ago

Consider that if I have a bunch of gold bars sitting in a vault somewhere, I don't have to sell them to make money off of them. I can borrow money against their perceived value, currently practically for free. This becomes particularly interesting if I can buy $100 of gold bars for $50. Even if I can't sell them, I can use them to my advantage.

imaginenore 12y ago
Where can you possibly borrow $22 billion with stock as the collateral?
- theworst 12y ago
  Acquisitions with much of the purchase being done in stock. My understanding is that this is very common.
  - imaginenore 12y ago
    Even if your understanding was true, it still supports my original statement - stock is not cash, and you can't easily get much cash for it on the scale of tens of billions.
    - theworst 12y ago
      The first part of your sentence makes it sound like you strongly disagree with my understanding. Can you elaborate? My point wasn't that you can turn stock into cash, but that you can turn stock into some of the same things that large amounts of cash might be used for -- acquisitions.

harryh 12y ago

Alibaba sold a hell of a lot more than 0.1% of itself today. About 125 times that number. And the price wasn't driven to zero. There's a lot more depth in US equities markets than you think.

imaginenore 12y ago
IPO is a special event. You can't compare it to a regular stock state.
- arfliw 12y ago
  You are technically correct that you can't just login to your broker one day and dump 5% onto the market - but there are ways to sell that amount of stock without crashing the price. A Secondary Offering is one way. It's basically doing an IPO over again but for an already public company. You can also sell directly to hedge funds/mutual funds etc. They have the opposite problem, wanting to acquire a large stake but being unable to because submitting an order for 0.1% would send the price to infinity.
- harryh 12y ago
  1) First off, what's so different about an IPO? The road show? Please. Investors aren't plunking down ~20B for a piece of Alibaba 'cause of a slick powerpoint presentation. 2) Secondly, companies routinely do secondary sales in which they sell stakes of themselves far in excess of 0.1%.
  - adventured 12y ago
    Secondary offerings are not routine for any given business, even if they occur regularly in the broad market among thousands of companies. It's rare for a company to do a secondary offering.
malchow 12y ago
"There's a lot more depth in US equities markets than you think." That's a keeper! Liquidity is a high-velocity component to markets. There's more depth that the sub-OP credits the market with at the present instant. But it really can disappear fast. I think there's actually a lot less depth to US equities than most people think, over the long run.