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Comment by kgermino | Hacker News Reader

They absolutely missed out on an opportunity. You can argues it would have been unethical for them to take advantage of it. But there was an opportunity to raise a substantial amount of money, which would help the company.

Unlike AMC and AA they couldn’t easily take advantage of it due to disclosure requirements.

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As much as I am on the WSB side of this fiasco, I still agree it was mature and smart for Gamestop not to make an opinion or jump on this in any form. It would have been a legality mine field for them to cross and properly capitalize on. Public companies are under a lot more scrutiny than private ones. Dont assume inaction was just because they're stupid. Theres zero wrong with picking and choosing battles that you know you can win. They probably saw this as so drastically out of their control, it would be too difficult not to get swept up in the turmoil.

But I do believe they made some good on the momentum, just not publicly. Probably got some more exec's from other companies willing to come aboard that they're still negotiating with.

> it was mature and smart for Gamestop not to make an opinion or jump on this in any form

GameStop couldn’t. They were deep into the quarter and had non public financial information. The companies that could sell stock did.

If GameStock could have sold stock and didn’t, and if I were a shareholder, I’d sue. They have an obligation to current stockholders. And a duty to be honest to new ones. Nobody bought their shares at inflated prices under duress.

They already had shares that scheduled to sell but decided not to execute. It seems like the advice I always got from my company's legal department when I asked if it was ok to something: don't do it.

Your lawsuit would be thrown out, there is no obligation in US law to issue stock in this scenario. "Fiduciary duty" has been quite well-defined by courts and this isn't even in the same galaxy.

> Your lawsuit would be thrown out

It would be a disclosure lawsuit. Lesser claims have been settled. The bar for throwing out cases is pretty low.

It may have been outright illegal though. You're taking money from your future shareholders. This may very easily be seen as securities fraud, because you're basically selling shares in your company despite knowing that it's massively overvalued.

Exactly the reason why Hertz did not proceed to do the same when their price irrationally rose during the pandemic. They wanted to do it, but the SEC sent them a letter asking for clarification, and that was enough for Hertz to get the message.

It's not exactly the same. Hertz was actually in bankruptcy, making all equity shares essentially worthless by definition. That's much more problematic than the scenario described here.

AMC is a better example, they offered new shares while the price was 3 or 4x of their lows

Not exactly, it's way more interesting than that (to me anyway)...

Hertz actually did sell new shares into the price spike. They went to the bankruptcy judge and got permission to sell new shares to help pay off the creditors. Shortly after they started selling the SEC essentially said "lol no" and told them to stop.

Buying back shares knowing they're massively overvalued would be destroying shareholder value. Buying them back when you believe they're undervalued creates shareholder value.

If that's all true, selling shares when the market is over-valuing them seems like it's creating shareholder value to me. (It's unethical perhaps; perhaps it's illegal. Either of those would be reasons to think it's harming shareholder value, but the sale itself is creating value.)

> Buying back shares knowing they're massively overvalued would be destroying shareholder value.

That is an interesting way of putting it. Sam Palmisano took IBM on a massive buyback program a decade ago, and nothing about IBM since then has refuted your thesis!

https://mbiconcepts.com/do-stock-buybacks-work.html

You might be interested in reading about Henry Singleton, the Michael Jordan of capital allocation. While running Teledyne, he shrewdly issued shares in exchange for acquisitions when Teledyne's stock was expensive. When shares were cheap and he didn't have other investment opportunities, he smartly bought back stock.

Beat the pants off Jack Welch yet fewer people know about him.

http://csinvesting.org/wp-content/uploads/2015/05/Dr.-Single...

Indeed. Outsiders book treatment of this story was great.

It seems like the SEC thinks it's (potentially) ok as long as you release all the pertinent information.

https://www.sec.gov/corpfin/sample-letter-securities-offerin...

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