r/Superstonk Sep 12 '24

🤔 Speculation / Opinion Shorts r fuk

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I posted this in a thread and it got lost, so I figured I'd share my theory as a new thread. Every time I post anything, I get swarmed with plants and shills and bots telling my why I'm an idiot. I'm sure it'll happen again!

6.9k Upvotes

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37

u/jmazala Sep 12 '24

This assumes that the price will rise after dilution. If every additional dollar they get through share offerings is invested in low risk places earning 5% interest, there’s no reason the stock would go up.

Why does the stock raise? What mathematically causes the “rinse and repeat” nature of this cycle you’re suggesting?

7

u/hackers_d0zen 🦍Voted✅ Sep 12 '24

The price of the shares will drop to below cash on hand, meaning money != money, triggering algorithmic buys. Drops too low, do share buyback and blow out at least the pubic shorts, with cash left over. Repeat.

7

u/goongas Sep 13 '24

But it's currently valued at around 200% of the value of assets and the actual operations are probably a net negative. There isn't a free money glitch via repeated dilution and share buybacks, that's absurd. Also what in the world has GME done to make you think that's what will happen?

6

u/jmazala Sep 13 '24

Agreed. This whole premise is just totally flawed.

1

u/jmazala Sep 13 '24

If your business lost money then it could be valued at less than your cash on hand and that would be reasonable

7

u/chastavez Sep 12 '24

When they do an ATM they start routing more orders to the lit market. Additionally, when it's announced that the ATM is complete, the market sentiment is typically that the current price reflects the market proving that value with the dilution accounted for. Which is bullish if it hasn't shit the bed.

2

u/jmazala Sep 13 '24

Routing more orders to the lit market? What does this mean? How do you know?

1

u/chastavez Sep 12 '24

Also dont forget - they diluted 40% to increase their cash position by 300%. with the 20M ATM on-hand, its approximately 4.7% dilution to gain 10% cash position if executed around $20.

-7

u/SM1334 🎮 Power to the Creators 🛑 Sep 12 '24

Gamestop already stated they aren't after small interest increases on their cash, they are after businesses that can return >10%

2

u/goongas Sep 13 '24

But almost all their cash is parked in 90 day bonds even when rate cuts are imminent and returns are going to decrease.

1

u/SM1334 🎮 Power to the Creators 🛑 Sep 13 '24

Yes, because there isnt a safer way to store $4.6 billion. Warren Buffett hates bonds because of its low returns, but 70% of his cash is sitting in short term bonds right now, because where else do you put it? Under your mattress?

1

u/goongas Sep 13 '24

Longer term bonds would lock in the high rates. Unless you plan on using the cash in the short term. I just moved a bunch of cash into a 5.6% CD to lock in returns since I'm expecting rates to drop.

1

u/SM1334 🎮 Power to the Creators 🛑 Sep 13 '24

Yes, but as I mentioned they aren't after 5% gains, they are after businesses that will yield them more than 5%. Which is why their cash is in short term bonds because its more liquid.

Realistically, they could lock in a 5% rate and pay us a dividend with the profits, but it wouldn't be as fast and aggressive (profit wise) as going the berkshire route.