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Technology Stocks : Advanced Micro Devices - Moderated (AMD)
AMD 231.83+1.7%Jan 16 9:30 AM EST
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To: dougSF30 who wrote (228189)3/16/2007 12:40:37 PM
From: TimFRead Replies (2) of 275872
 
In theory selling more shares wouldn't lower the stock price IF and only IF, either

1 - If its widely seen that the additional money is needed to keep the company going under (in which case you might not lower the stock price, but a company facing going under would already have a very low stock price). Also I'm talking about almost everyone thinking that the money is 100% necessary to keep the company from going under. To the extent that some people who represent the potential market for the stock don't think this, or others are unsure, then the benefit of "saving the company" means less in their minds, while the dilution does not.

or

2 - The money will get a return (or more importantly is perceived as getting a risk adjusted return) that will increase earnings, by enough to offset the dilution.

In most cases neither 1 or 2 fully applies. The risk may be lowered, and future earnings may increase, so that the total market cap might go up (but even that isn't a safe bet, in fact the possibility of decreasing marginal returns from additional investments, and fear of additional dilution might even lower the market cap), but if it does its not likely enough to keep the stock price the same.
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