Not a finance expert so apologies if any of this is wrong but from my understanding there’s a new strategy now. The theory, is that stock brokers are taking advantage of a mechanism which allows them to create and trade hundreds of thousands of ghost shares in GME that don’t really exist which, if true, means they can never lose and the casino is rigged. Superstonkers are direct registering their shares which means stock brokers don’t have any ability to trade them. The theory, is that once they direct register all the available shares it will expose the number of fake shares the brokers have created causing the mother of all short squeezes as people start calling in their positions but there are no real shares available for the brokers to purchase and fulfil their positions. The superstonkers think this will be enough to crash the entire market and expose the traders to fraud as there will be no legitimate reason that will hold up in court for the vast quantity of these imaginary shares - they believe the quantity will vastly outweigh the acceptable number that could be created for the purposes of the mechanism. The percentage of the shares that have been registered so far is around 60% and growing. Whether the Superstonkers are right or wrong about the outcome won’t be able to be determined until they reach 100% or maybe close to it if the brokers start panicking beforehand and a short starts.
I don’t have any shares but it is really fun to watch as an outsider.
I don't think this is possible? You can do a stock split but existing shareholders automatically get an increased amount of stocks so they don't lose any value. GME actually did this in the summer so every shareholder got 4 stocks for every one they previously had.
If you could just issue additional shares willy nilly without adjusting the shares of existing shareholders everyone would take their money out of your company and no-one would put any into it because you'd have devalued the original shareholders investments overnight and subsequently you'd no longer be trusted. You would be bankrupting your company.
Companies issue new shares all the time. As far as dilution goes, I'm speaking less about per share price and more to the plan to register all of these physical shares. It reminds me of the math problem about going halfway to the doorway with every step, and trying to decide how many steps it will take to finally cross the threshold. It can't ever happen.
The thing they’ve got going for them is, so long as more shares don’t get added like you say, the closer they get to the goal the more likely people will be to join in. If they’re at 60% now like they say they are (find out for sure in a few days) I think things are going to start snowballing, either this quarter or next when they presumably cross the 66% or 75% marks. People will jump on the bandwagon just for the fun of it to “stick it to the man”.
Yes it has absolutely occurred to me that it could possibly be scam. As I said in my original comments, I have no shares and I am watching as an outside observer. As this is unprecedented, no one can say with 100% certainty who is right or wrong unless they succeed in their mission of locking up the float. It is quite possible that both sides are right - that there is both rampant fraud and an unviable company. Only time will tell.
Normally it wouldn't hit 100% but this isn't remotely a normal case. Further, each percentage point more DRSed, causes huge problems for these hedge funds who naked shorted.
A public company can absolutely issue new shares, it's not the typical way companies raise money but it happens all the time. GameStop itself did it during the craze to capitalize on the increase share price did they not?
No idea why you think it would bankrupt the company, it changes nothing. The new shares is balanced by the new money on the balance sheet.
Ok so did some reading and you are correct, new shares can be issued but GameStop did a share split, not a dilution.
Share dilution: more shares added, existing shareholders percentage of company decreases, investments are devalued.
Share split: more shares added, existing shareholders percentage of company remains the same, value of investment remains the same.
As far as I'm aware, share dilution is a lot less common than share split precisely because shareholders are essentially losing money. If GameStop had done a share dilution everyone who invested previously would have lost 75% of their value. That kind of thing absolutely could lead a company going bankrupt because it would not be looked kindly on, both by existing or prospective investors.
> Of course, investor sentiment can be negative if a company dilutes shares for this reason alone. Issuing new shares is often seen as a less risky way to raise capital because the company does not have to pay back the money it raises.
> However, there are some risks associated with share dilution, as it signals that the company could destroy shareholder value, and it leads to poor investor sentiment towards the company.
> Issuing shares can also be a warning signal for shareholders, because it may signal that the company can’t raise capital by borrowing or issuing bonds.
> What are the risks of share dilution?
> The most obvious risk of share dilution is that it can hurt stock prices. When a company dilutes its shares, the value of each existing share is reduced. This most of the time leads to a decline in the stock price, which is proportionate to the reduced value of each share.
> It can also make it harder for the company to raise capital in the future, by issuing shares because shareholders take dilution as a serious risk.
> It makes it more difficult to raise money because potential investors will see that the company has already diluted its shares and they'll be less likely to invest. Another risk is that dilution can increase the volatility of the stock.
> The lower stock price can also lead to more volatile swings in the stock price. This can be a problem for investors who are looking for stability.
According to Google their market cap is currently 7.78B but I don't know what it was when they issued them so it's hard to say how big of a proportion it was at the time. The stock price did go up when they did it too, against all odds.
There are issues with issuing shares as described in the link you shared, I don't want to minimize that. And you're right about diluting existing shareholders.
My point was more that many companies do it and the money the company raises by doing so gets added on the balance sheet, which can be used to fund profitable ventures, or to burn. The main differentiator is whether they are raising money because they believe they can make more money out of it (ie Shopify) or because they have to in order to avoid bankruptcy (ie Hertz).
Ahhh I had no idea about GME doing this in 2021. I also didn't know Shopify and Hertz had both performed share dilutions. I thought they were pretty rare but they must have happen more than I realised. Thank you for informing me.
Why do I need to show profits after six months? Would you say that of AAPL? I'm convinced that the hedge funds didn't close their shorts. Like legions of others, I've directly registered my shares and am willing to wait.
