Thursday, March 30, 2006 5:33:56 PM
This is simple math.
If a company is worth $1000 with 10 shares of stock worth $100 each, and they add another 1000 shares of stock, their market cap doesn't just automatically jump to $101,000.
Otherwise what's stopping them from issuing a Billion shares and being the first ever Trillion dollar market cap company?
Crank up the printing press guys!
seriously, stockbonds, I know that my wry seense of humor gets lost on people here with thin skin and way too much money on the line, in the above example, the stock in the company automatically gets repriced by the market, by arbitrage, if there is any discrepancy. The share of the above company, with an addition of 1000 new shares, would be worth $1.01, down from $100. Same with a stock split, they split 2:1 the stock is cut in half. Well, not exactly the same, but similar.
The new shares simply aren't worth what the old shares are, otherwise the company's with the largest SOS would be the ones with the biggest market caps.
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