How Does Stock Work

[tomcollins]

Not true.  They can print new shares at any time.

http://www.fool.com/investing/high-growth/2006/04/28/foolish-fundamentals-stock-dilution.aspx

That's awful. I always thought that companies would just split their stock if they needed more units.

Splitting stock creates more units for the current owners.  Not for the company to give away.

[FatherMcGruder]

Don't worry, they promise to only do it when it is in your best interests.  I thought you agreed that consent was not a good factor by which to judge an outcome?

...consent isn't necessarily the best factor, or even a good factor, by which to judge an outcome.

I added emphasis. Investors may have consented to a company printing new shares when they bought its stock. That doesn't mean that it won't harm them if it does so.

Splitting stock creates more units for the current owners.  Not for the company to give away.

Isn't a company typically a current owner? Does it not have the authority to sell the new shares created after a split?

[Gluskab]

Don't worry, they promise to only do it when it is in your best interests.  I thought you agreed that consent was not a good factor by which to judge an outcome?

...consent isn't necessarily the best factor, or even a good factor, by which to judge an outcome.

I added emphasis. Investors may have consented to a company printing new shares when they bought its stock. That doesn't mean that it won't harm them if it does so.

Splitting stock creates more units for the current owners.  Not for the company to give away.

Isn't a company typically a current owner? Does it not have the authority to sell the new shares created after a split?

A stock split is typically just a 2 for 1 trade in order to not make the price of a stock seem so scary and unaffordable.  There are a few companies that don't believe in stock splits, Berkshire Hathaway and Google are notable ones.

[tomcollins]

Don't worry, they promise to only do it when it is in your best interests.  I thought you agreed that consent was not a good factor by which to judge an outcome?

...consent isn't necessarily the best factor, or even a good factor, by which to judge an outcome.

I added emphasis. Investors may have consented to a company printing new shares when they bought its stock. That doesn't mean that it won't harm them if it does so.

Splitting stock creates more units for the current owners.  Not for the company to give away.

Isn't a company typically a current owner? Does it not have the authority to sell the new shares created after a split?

I'm not sure if it really makes sense for the company to own shares of itself, it's the same thing as if those shares didn't exist.

If you split the shares, everyone gets the split, the value of each share is half of what it was.  Dilution occurs by wanting to give out new shares and *dilute* the value of everyone else.  You are creating something from nothing in that case.

It is counterfeiting in a way, although it's allowed and expected.  Companies that dilute too much will have low valued shares since no one will want to buy any (if their value gets diluted away).  So you might be able to get away with it once or twice, but Wall Street doesn't tolerate that kind of behavior, and no one will touch your stock after that.  So the entire benefit to the person who gets the diluted share turns to nothing since he can't sell it since no everyone is scared it would be diluted again.  But even so, they could take all the dividends and be fine.  I'm not sure who needs to approve of dilution, it may be the board.  So the board really is the voices of the shareholders.  If the board says no dilution, then it doesn't happen.  So really there is some level of consent, although a few powerful people can control the board, and then get all the benefits of dilution.

[Gluskab]

Stock splits 'dilute' the shares, but then you get your fair portion of new shares compared to what you previously owned, so ownership % stays unchanged.

[benjamindees]

I added emphasis. Investors may have consented to a company printing new shares when they bought its stock. That doesn't mean that it won't harm them if it does so.

Investors don't need to consent.  Corporations issue new shares by right, because they are corporate 'persons' and they own themselves.  Issuing shares confers no legal rights of ownership.  It is just meaningless claptrap designed to defraud suckers.  It is like fiat money -- a unit of exchange backed by nothing whatsoever that can be created at will.

Of course, thanks to the illustrious dipshits in the US Justice Dept., you can't do anything like printing your own money.  But corporations sure can.  So in the modern US, immortal, psychopathic legal fictions have more rights than actual humans.

[Gluskab]

The US stock market, in practice, has turned into a very efficient tool for transferring wealth from individual investors to upper management of publicly traded corporations.

[tomcollins]

I added emphasis. Investors may have consented to a company printing new shares when they bought its stock. That doesn't mean that it won't harm them if it does so.

Investors don't need to consent.  Corporations issue new shares by right, because they are corporate 'persons' and they own themselves.  Issuing shares confers no legal rights of ownership.  It is just meaningless claptrap designed to defraud suckers.  It is like fiat money -- a unit of exchange backed by nothing whatsoever that can be created at will.

Of course, thanks to the illustrious dipshits in the US Justice Dept., you can't do anything like printing your own money.  But corporations sure can.  So in the modern US, immortal, psychopathic legal fictions have more rights than actual humans.

A corporation cannot make a decision itself, it's like saying a rock makes a decision.

Someone actually needs to authorize it.  Is it the board of directors?

[Grinder]

Generally it's the board of directors, but if it has a very large impact on the company the shareholders may vote over it. The current shareholders usually has the right to purchase the new shares if they want to. The board of directors is elected by the shareholders. Sorry, but there's no great conspiracy here.

[tomcollins]

Generally it's the board of directors, but if it has a very large impact on the company the shareholders may vote over it. The current shareholders usually has the right to purchase the new shares if they want to. The board of directors is elected by the shareholders. Sorry, but there's no great conspiracy here.

There's no conspiracy, but there's a lot of back scratching.

[steelhouse]

Generally it's the board of directors, but if it has a very large impact on the company the shareholders may vote over it. The current shareholders usually has the right to purchase the new shares if they want to. The board of directors is elected by the shareholders. Sorry, but there's no great conspiracy here.

There's no conspiracy, but there's a lot of back scratching.

I think there should be law that the CEO get no pay, stock options, or bonuses. That is how google and aapl work.  The directors should be selected by being the largest shareholders, no voting.  They too should get no pay or options.

[ColdHardMetal]

I think there should be law that the CEO get no pay, stock options, or bonuses. That is how google and aapl work.  The directors should be selected by being the largest shareholders, no voting.  They too should get no pay or options.

Why do expect people to work for no compensation?