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how do companies go public
how does it happen how do you create
stocks it's very simple
how all of these stocks let's just use
gamestop for example
how does a company like gamestop end up
becoming a public company
very simple they start off as private
companies
and there's a few shareholders this is
not even knowing the history of gamestop
i'm just kidding
generally speaking and they start with
there's a private company so watch
you're i'm gonna turn the page
i'm gonna write this down
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so they start off as private companies
right i'm private
and a private company will have let's
just say x
number of shares and let's say x
equals one million
let's say they have one million shares
and let's say there are three people
that own all of those shares there's
three in sizes a president a founder
right
ceo and one of us is three owners right
that's a private company
okay let's say the company starts to do
well
they start to grow and they say hmm you
know what
i think it will be really good for us to
raise some money
we want to raise money so we can grow
even faster
maybe we can make some acquisitions i'd
like to actually be public also i could
start
incentivizing my employees by giving
them shares of stock
or options so there's different reasons
why a company goes public
maybe they say you know what we're doing
really well i'd like to be able to sell
a few of my shares and take some chips
off the table
but still to maintain control i want to
sell out so what
happens is a company that wants to raise
money
get some liquidity or incentivize
employees whatever it might be there's
many reasons why
they will approach an investment banker
or a lawyer
and find out and eventually if they can
go
public that's how it starts when they go
public
all that happens is this once private
company
with this million shares and remember
this million shares i just picked an
arbitrary number
it could have been a thousand shares it
could be 10 million shares it could be a
billion shares there is no limit
to how many shares there could be
because what you have is
in every corporation you have what's
called you know your corporate indenture
and your minutes
right and you can basically have what
are called authorized
shares and
through any you know you could just say
the board of directors
and that would be the people owning the
company right agreed they're going to
increase the number of authorized shares
so you could just keep
issuing more and more shares there's
just nothing that stops a company
from issuing more shares why is that
important to know
well it's very important to know then
when you're shorting a company like
gamestop or buying gamestop
just remember this either way it's not a
finite number of shares outstanding
this company can keep issuing more
shares it's not like an investment like
bitcoin
whether you hate it or love it notice
bitcoin is a certain amount
it's a maximum amount of bitcoins that
can ever
be issued that creates some perception
of scarcity
when you have a company that's a public
company theoretically
there is no limit they can keep issuing
more and more shares in fact i will tell
you this
if gamestop stays up long enough
above its fundamental value if it stays
up for a prolonged
time mark my words they're going to
start selling and issuing more shares
and raising money
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you