Ratjoy.com » Forums » EoS Stock Market Discussion » Availability of Shares
You need to register or login to post a reply.
Availability of Shares
|
Matthew Suozzo RJ: Buckaroo Bonzai Post Rating: 0 + / - Total Posts: 40 Karma: 51 Joined: Apr 5, 2012 |
Posted on Apr 19, 2012 I'm not too familiar with economic practice. Can someone explain to me the rationale behind not issuing more stock when there are no available shares? Even though it may dilute the influence of those who already hold the stock, doesn't it hinder the support of those who feel a company is undervalued?
|
|
Ay Vee RJ: Ay Vee Post Rating: 0 + / - Total Posts: 33 Karma: 29 Joined: Mar 30, 2012 |
Posted on Apr 19, 2012 As a shareholder, you own a portion of the company's net worth. Effectively, this means you're entitled to a portion of the earnings, although you don't get to actually have the money as cash. Would you rather have: 10% of $100 <-Company continues to have steady earnings or 5% of $150 <- Company doubles the number of outstanding shares, and earnings go up 50% The only time it makes sense to issue shares would be a scenario where the CEO/Chair has a plan which will cause earnings to go up more than the effect of the dilution. In real life, for a security listed on an exchange (publicly tradeable) it almost never occurs that there would be a price at which no one was willing to sell, so the 0.0 available shares issue doesn't occur. (Or rather, all post IPO companies are 0 available shares, but there is always someone with a limit sell order in place, or a market maker showing an ask so it is always possible to by any security at some price, just not necessarily a fair one). |
You need to register or login to post a reply.