[hamstercat]

A public company can absolutely issue new shares, it's not the typical way companies raise money but it happens all the time. GameStop itself did it during the craze to capitalize on the increase share price did they not?

No idea why you think it would bankrupt the company, it changes nothing. The new shares is balanced by the new money on the balance sheet.

[rcarr]

Ok so did some reading and you are correct, new shares can be issued but GameStop did a share split, not a dilution.

Share dilution: more shares added, existing shareholders percentage of company decreases, investments are devalued.

Share split: more shares added, existing shareholders percentage of company remains the same, value of investment remains the same.

As far as I'm aware, share dilution is a lot less common than share split precisely because shareholders are essentially losing money. If GameStop had done a share dilution everyone who invested previously would have lost 75% of their value. That kind of thing absolutely could lead a company going bankrupt because it would not be looked kindly on, both by existing or prospective investors.

Excerpt from https://valueofstocks.com/2022/06/18/share-dilution-vs-stock... :

> Of course, investor sentiment can be negative if a company dilutes shares for this reason alone. Issuing new shares is often seen as a less risky way to raise capital because the company does not have to pay back the money it raises.

> However, there are some risks associated with share dilution, as it signals that the company could destroy shareholder value, and it leads to poor investor sentiment towards the company.

> Issuing shares can also be a warning signal for shareholders, because it may signal that the company can’t raise capital by borrowing or issuing bonds.

> What are the risks of share dilution?

> The most obvious risk of share dilution is that it can hurt stock prices. When a company dilutes its shares, the value of each existing share is reduced. This most of the time leads to a decline in the stock price, which is proportionate to the reduced value of each share.

> It can also make it harder for the company to raise capital in the future, by issuing shares because shareholders take dilution as a serious risk.

> It makes it more difficult to raise money because potential investors will see that the company has already diluted its shares and they'll be less likely to invest. Another risk is that dilution can increase the volatility of the stock.

> The lower stock price can also lead to more volatile swings in the stock price. This can be a problem for investors who are looking for stability.

[hamstercat]

They issued for over $1B worth of shares in 2021: https://news.gamestop.com/news-releases/news-release-details...

According to Google their market cap is currently 7.78B but I don't know what it was when they issued them so it's hard to say how big of a proportion it was at the time. The stock price did go up when they did it too, against all odds.

There are issues with issuing shares as described in the link you shared, I don't want to minimize that. And you're right about diluting existing shareholders.

My point was more that many companies do it and the money the company raises by doing so gets added on the balance sheet, which can be used to fund profitable ventures, or to burn. The main differentiator is whether they are raising money because they believe they can make more money out of it (ie Shopify) or because they have to in order to avoid bankruptcy (ie Hertz).

[rcarr]

Ahhh I had no idea about GME doing this in 2021. I also didn't know Shopify and Hertz had both performed share dilutions. I thought they were pretty rare but they must have happen more than I realised. Thank you for informing me.