Lets talk about why so many companies are selling stocks and diluting their shareholders, what this means for you, and how you can use this information to make money - Enjoy! Add me on Instagram: GPStephan
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All of this starts with what’s known as SELLING STOCKS AND SHARE DILUTION.
This is the practice where a business issues more stock on the market for sale, in an effort to raise money at their current share price. For the company, this can be GOOD, because it means they’ll receive more working capital to re-invest…BUT, this is often done at the expense of YOU, as the INVESTOR, because NOW your shares own just a little bit less than they did before.
The concern, at THIS point, is that a company could simply be raising extra money at their investors expense, cashing in on record high stock prices and market euphoria, paying themselves larger salaries, and subsequently not providing any extra benefit for their shareholders…even though, the investors are the ones taking all the risk.
First, by doing this - a company is able to raise money at a price they NEVER would’ve ordinarily achieved.
Second, they’re able to take advantage of rising stock prices.
Even if they DON’T NEED the money - at the core, they are STILL a business - and having more cash on hand allows them more leverage and flexibility in the event they need it, with very little cost to themselves.
Third, they might be able to use that cash to acquire other businesses, or re-invest into other ways of making money.
For example, even if a company dilutes its shareholders by 10%…maybe they use that revenue to build new factories, which DOUBLE profits…and now, even though you own LESS of the company…that smaller portion is worth MORE because they’ve expanded into new ventures.
BUT…there are downsides of this.
First, you now own less than you did previously.
Because of that, you need the company to make MORE money, or go UP in price in order to make a profit…otherwise, you wind up owning a smaller piece of the pie, and a smaller piece of the profits, while the company raises money at your expense.
Second, there’s no guarantee the company will use the money appropriately.
While some have clear intentions to use the money for growth and expansion, and it could work out EXTREMELY WELL…others could simply be taking advantage of record high stock prices for their own gain…even if that means hurting their investors in the process.
And third, analysts warn that so many unprofitable companies issuing shares is a sign “that perhaps points to companies getting greedy.”
Throughout both previous points where unprofitable firms dominated equity offerings, the stock market was either at the start of a bear market, or already in one. Sundial Capital Research, who conducted this study, said that “money-losing firms are flooding the secondary market adds to a growing set of signs that point to elevated enthusiasm,” and that “When there is increased appetite for issues from unprofitable companies, it tends to mark a point of euphoria.”
At the end of the day, it’s up to that individual company to put this cash to its best use, and not take advantage of retail enthusiasm to buy whatever they can. It’s not always bad that a company wants to raise money, especially during a time like this…but, it’s what they DO with that money that matters…and, if you invest in a company, you’ll have to hold the conviction that they won’t just pay themselves bonuses…but, instead, grow your piece of the pie…and make you more money in the process.
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28 thoughts on “Cashing out of the stock market”
  1. Avataaar/Circle Created with python_avatars Steve Kowalski says:

    Just buy and hold. Do not take advantage of when the stock price is high to sell out and just rebuy lower.

  2. Avataaar/Circle Created with python_avatars Ethan Montgomery says:

    Sometime when i follow up with watching
    I make a couple list of options and do my research

    But I’m not an upseller

  3. Avataaar/Circle Created with python_avatars The Bronze Spoon Investor with Steven Labrenz says:

    Great video I really liked it!  I’m a young investor learning as much as I can right now about the stock market.  I invest in DIVIDEND PAYING STOCKS FOR PASSIVE INCOME!  My passive income portfolio is up 48% this year!!!  I’m a hard blue-collar worker and have always paid for everything myself in life.  I believe in WORKING hard & PLAYING hard!  I’m very interested in learning more wealth building strategy videos from your channel, any tips? Keep producing great content and I can’t wait to watch your next video.

  4. Avataaar/Circle Created with python_avatars JimL says:

    It’s a f’ing bubble since April of last year. There’s been some highly suspect trading, and parking of money.

  5. Avataaar/Circle Created with python_avatars Alexander W. says:

    Graham, I destroyed the like button in a past video………now I can't invest in it…….thanks Graham.

  6. Avataaar/Circle Created with python_avatars eric hogan says:

    how are they diluting shares? the company is simply selling part of its ownership. i dont understand the math behind it devaluing the stock.

  7. Avataaar/Circle Created with python_avatars JCS Enduro says:

    I’m 17 and wondering if I should start investing as soon as I turn 18 or wait for a big market crash?

  8. Avataaar/Circle Created with python_avatars Bryan Mitchell says:

    Oh it's going to crash not sure why this isn't apparent……it's going to crash hard!

  9. Avataaar/Circle Created with python_avatars Road To Millions says:

    I'm long while the Fed keeps its easy money policy in place. However, even if the market continues its bull run, its always good to establish a hedge in anticipation of the next time the market has a temper tantrum.

  10. Avataaar/Circle Created with python_avatars YoNootz321 says:

    Isn't raising money the whole purpose for a company to go public in the first place (plus to offer an exit opportunity for the initial private investors)? I don't see anything out of ordinary, they're just doing what they're supposed to do. They just use the market as a cheaper alternative to bank debt.

    As long as they don't use the raised capital to pay hefty bonuses to the executives, but to invest in business growth, I don't see a problem.

  11. Avataaar/Circle Created with python_avatars Yulianna Castillo says:

    What would be a good outlet to start if we wanted to invest and know nothing about investing?

  12. Avataaar/Circle Created with python_avatars Justin Dundon says:

    Dude!!!…just shave!!!! You have less facial hair than a 14 year old Italian girl. It’s just sad 😞

  13. Avataaar/Circle Created with python_avatars zetsun0 says:

    Say: "What's up children, Chris Hensen here, why won't you take a seat?"

    I dare you.

  14. Avataaar/Circle Created with python_avatars Vlad says:

    I'm not buying 12 Oz of coffee for $16 dollars you can keep your coffee.

  15. Avataaar/Circle Created with python_avatars Maestrul Gamer says:

    So basically,diluting stocks affects the value of the stocks just how inflation affects the value of the currencies?

  16. Avataaar/Circle Created with python_avatars Vlastimir Beršnak says:

    Sometimes it still amazes me greatly how I went from an average lifestyle to earning over $120,000 per month from a $300,000 startup capital. I have learned a lot these past few months to doubt that opportunities abound in the financial markets. only thing is to know where to look. my advise to any investor is to not buy into the bullshit of an imminent market crash since it's all bogus hype. the market will exist no matter what happens

  17. Avataaar/Circle Created with python_avatars chiepah2 says:

    For intending your pun, you get a like and a comment for the Youtube algorithm.

  18. Avataaar/Circle Created with python_avatars The AdVentureists says:

    This is why we cashed out our six figure investment portfolio to start our new projects. There are still a lot of opportunities out there that you can have much more control over! 🙂

  19. Avataaar/Circle Created with python_avatars entrapment of success says:

    I'm leaving the country.. it hurts to know what I know. You know how during ww2 like the germans that knew what was going on behind the walls, and did nothing look like ass$oles..not done that. It crossed the line with me.

  20. Avataaar/Circle Created with python_avatars INVESTING BRINGS SUCCESS says:

    SUCCESSFUL PEOPLE DON'T BECOME THAT WAY OVERNIGHT. WHAT MOST. PEOPLE SEE AT A GLANCE_ WEALTH A GREAT CAREER, PURPOSE IS THE RESULTS OF HARD WORK AND HUSTLE OVER TIME. I PRAY THAT ANYONE WHO READS THIS Will BE SUCCESSFUL IN LIFE.

  21. Avataaar/Circle Created with python_avatars alysonwolfe says:

    Hey Graham, so can you make a video about getting started with buying stocks??? Like how do you decide on a brokerage company? How do you pick your managers? How do you decide which investments to pick? There are so many different types of accounts ect? So many of your videos talk about investing but you never talk about the actual “how to” in details. Please make a video!!!! Thanks! Big fan!!

  22. Avataaar/Circle Created with python_avatars Hilton Maison says:

    Hi everyone, I'm actually looking for a good trader that can help me trade and make profits, .. Any idea..

  23. Avataaar/Circle Created with python_avatars Aduli Collins says:

    POOR MINDSET IMMEDIATELY SEES A SURPLUS AS AN OPPORTUNITY FOR CONSUMPTION. RICH MINDSET SEEKS TO SPEND THEIR TIME, RESOURCES, AND ENERGY ON WORK THAT CONTINUES TO PAY OFF LONG AFTER THE EFFORT HAS BEEN INVESTED.

  24. Avataaar/Circle Created with python_avatars GrubKiller1177 says:

    So guys is it not a good idea to invest long term anymore? Like my index funds?

  25. Avataaar/Circle Created with python_avatars Chris Nelson says:

    The statement that companies are selling shares at the expense of you the investor is inflammatory and inaccurate. A company is putting cash on their balance sheet so they can grow the business an increase share value. I want to buy in companies that are smart enough to issue stock when the price is high and buy stock when the price is low.

  26. Avataaar/Circle Created with python_avatars Lin Y says:

    I sold out all my stocks end of last year made about 50% profit only been investing for a about a year, very happy with my decision and no regrets at all. The crash is coming you see the signs everywhere

  27. Avataaar/Circle Created with python_avatars lariw says:

    Let s talk about how real companies (WFC GS BAC JPM) are raising dividends and buying back stock. If you buy garbage it treats you like garbage. If you're not sure who the sucker is (when amc and gme issue more shares) take a look in the mirror.

  28. Avataaar/Circle Created with python_avatars Eui Hyun Paik says:

    So does this mean I should stay away from SP500 and other index funds for a while???

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