Intriguing, and (lamentably) not entirely impossible. But, you know: bubbles do have the habit of bursting.
Yes, that's basically the point we've reached with the stock market as a whole right now. Nothing is tied to any kind of fundamentals. It's all about "we like the stock".
Not really, though. GME and other meme stocks might be out of whack a lot, temporarily, and stocks generally might be overvalued somewhat (and, I’d say, harder to value because rates are so low, making the horizon longer), but I’m pretty sure that the mechanisms are still there that fundamentals will reassert themselves.
Really? I saw a local Software Etc. and Funcoland both get replaced by GameStops. Both times, it was a straight downgrade in terms of customer experience.
A couple billion dollars in the bank buys you a lot of lawyers.
As Matt pointed out, AMC is doing it. I agree with dougmwne, this is the corporate kickstarter opportunity of a lifetime. They should take it.
It's also a negative feedback mechanism in a market full of positive feedback mechanisms (ie, the short squeeze). Creating more stock makes the market more stable.
I am financially illiterate, but I understand the reddit posts to mean that short squeeze is inevitable because GME is >100% shorted and issuing more shares would kill the short squeeze and drive the price down
A low stock price creates risk because it makes it hard (expensive) to raise capital. Well, here you are, it doesn't get better than this!
Now, if many peiple start believing that, it will cause an actual bubble. When interest rates are taken into consideration, the global stock market valuation in terms of average P/E rates is about where you’d expect it to be.
Which is higher than but a few times before, to be sure. But still in the realm of plausible fundamentals.
A share of stock represents a tiny percentage share in a company's assets and profits. For simplicity, let's say a company has 100 shares, and you own 1 share or 1%. If they then issue 100 new shares and sell them on the market to raise cash, your ownership in the company has been diluted from 1% to 0.5%.
That's why company shares will never be safe as an arbitrary store of value like bitcoin is. No one can arbitrarily dilute your share of the bitcoin pie.
In theory, what is stopping any stock from being a cryptocurrency (minus the crypto part)? Can anything tradeable with a fixed supply become a currency? What other magic requirement is missing?
Interestingly, local dispensaries at one point entertained the idea of BTC ATMs to get around the fact that they have no ability to take credit cards due to the illegal state of pot at the federal level, but this was abandoned after a bit because the volatility was too expensive to make this a worthwhile proposition.
I keep a small float in FIAT so I only do this when it’s the cheaper option.
Yes, very much so (including something with unpredictable supply). Through history, diverse things were used as currency including shells, salt, silver and gold.
The commonly used definition of a currency was coined by Aristotle and is that it's an asset fulfilling three requirements:
- being an intermediary of exchange;
- being a store of value;
- being a unit of account.
You might notice that most cryptocurrencies are not actually currency owning to the first point.
Paying dividends is just one way a company returns profits - but there are plenty of other ways, such as share buy backs, or reinvestments in the company (thus making future returns higher).
Dividends, like rents generated by real estate, accrue based on the financial performance of the underlying asset. Dividend payout is the only way valuation has any real basis in financial performance of the underlying business.
No dividend = something else is afoot. Most stocks right now are baseball cards.
1)Possibility of issuing dividends means the valuation can't be too low. If it's too low you can just buy it out and issue dividends next year making bank.
2)The the company may hold assets valuable to other (maybe dividend paying) entities. If the valuation is too low they will just buy it out and pay out more dividends.
3)The company may buy its own stock. If the value is too low they will buy a lot of it and issue dividends later at big multiplier.
I am not sure why you're feeling so strongly about that point. It's about the first thing you learn when dealing with equities. If anything paying significant dividends right now means the business is unlikely to grow anymore.
People trade stock as if the companies were yielding something to the stock owners. Many don't. Acting "as if" the company is making those payments -- imputing a price to the stock according to the underlying fundamentals, or some temporally discounted variant -- is a fantasy. It is a symbolic act. An exercise in recursion, anchored in nothing.
The story the market is telling is a very different kind of story, now.
Aka the Modigliani–Miller theorem.
https://en.wikipedia.org/wiki/Dividend_policy#Modigliani%E2%...
Periodically people lose sight of that and start talking about a new paradigm and new valuations (usually because using that metric means prices are insane), but it always returns to future earnings.
All indicators are we are near the top of a spectacular bubble in assets from bitcoin to spacs to tech stock prices the red signs are flashing. Who knows how or when it ends though.