Titanium Got Crushed
Also Pornhub activism, mortgage prepayments and Hot Wheels.
Programming note: Money Stuff will be off tomorrow, back on Monday.
Here’s a theory. You run a bank, and a smallish public company comes to you and asks you to lend it, say, $500 million. You say “okay I will need to know more about your revenue and expenses and assets,” and the company says “no no no never mind that. Here’s the thing. We have publicly traded stock. We can always issue more of it. Sure the price might go down but then we’ll just issue more and more stock; we can always issue any dollar amount of stock that we want.1 Right now our market cap is $1 billion and we have 100 million shares outstanding at $10 each, but even if the price falls we could issue five billion more shares at $0.10 each, or five trillion more shares at $0.0001 each, or whatever. So we can always raise $500 million to pay you back; our stock might go down, but a dollar loaned to us will always be worth a dollar. So we are absolutely money-good for $500 million and you should lend it to us at the risk-free rate without inquiring into our collateral or cash flows.”