There are actually a couple reasons why I'm not a huge fan of secondary stock offerings...
1. A company is diluting its existing shareholders' stakes by offering new stock. When there's more stock than there was before it becomes a less rare stock to own, causing the price to be adjusted — think supply and demand.
2. Companies also tend to offer the shares at a discounted price — anywhere from 5% to 30% — from where it was previously trading on the stock market.
3. A company is basically shouting to traders that its stock's price is too high and it would love to get traders' money in exchange for discounted stock.
But worst of all...
Secondary stock offerings are the biggest threat to these Meme stocks... |
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