| Yes, that's a textbook scenario that makes sense when the economy is functioning as it should. To truly understand how it applies in these current times you would need to take a systems-thinking approach. Sure, someone getting in wants to buy at half price, but the existing people want to sell as soon as they hear about a potential issue diluting their ownership/price/dividend. Then the company might get a reputation for a tendency to issue shares and investors will see it as less attractive (buybacks are attractive). Now, let's say a bunch of companies need this money, maybe like the $1T in US bailout money (Not including the other $1T+ in stimulus). Where does that money come from? Some of the largest financial companies have about $5T AUM, but it's already invested. A stock issue will only erode the value they have to work with. Billionaires and millionaires are typically listed as that based on ownership of assets (stock in their company), not what's in the bank, so they don't have enough cash to make an impact. We are close to 20% unemployment, so this tends to rule out the masses from investing new money on a large enough scale to make that sort of systemic impact (not to mention that the masses generally shy away from investing in individual stocks). We are a consumption based economy and when consumption rapidly declines, and even goes to near zero for some industries, then the system will not produce the textbook outcomes. Talk to professionals, they will tell you they have seen some odd things in the past few months. Bonds would typically be a better way for the company to adjust their capital short-term for a number of reasons like not constantly buying back and issuing stock. Of course that market has been screwed up since the last recession, so this textbook approach isn't likely to be effective either. |