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In line with https://money.stackexchange.com/a/7985, why don't corporations with skyrocketing share prices issue shares immediately? Famous examples this past week are AMC, BBBY, GME. They were all at risk of bankruptcy but their share prices skyrocketed.

Do they just need time to hire corporate lawyers and investment bankers? Do the corporate lawyers and investment bankers just need time to prepare the documents and find buyers?

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    I'm pretty sure this question has been asked recently, but i can't find it.
    – RonJohn
    Feb 2 at 3:34
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    I think that the question asked was about splitting the stock to create a larger float. I don't recall one about a secondary but wouldn't swear that none were asked. There have been so many GME questions during the past two weeks that it could very well be buried within one of them. Feb 2 at 3:51
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    Out of curiosity, how fast can a company do the paperwork, legalese and get a secondary issue to the market? Feb 2 at 3:54
  • The moment they announce such plans, everyone who is artificially supporting their price will reverse their position. They'll suddenly hate GameStop management more than they hate Melvin Capital.
    – user253751
    Feb 2 at 9:49
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    This also assumes the incorrect presumption that companies make money by selling shares. No? What do you think happens to the capital raised from a secondary offering? Feb 6 at 4:15
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Do they just need time to hire corporate lawyers and investment bankers? Do the corporate lawyers and investment bankers just need time to prepare the documents and find buyers?

Yes to both.

Just as importantly, the existing owners of the company need to vote to dilute their ownership.

Also, when the price is artificially high, it's because of wild speculation inherently based on the existing finite supply of shares. Issuing more would quickly cause the price to collapse. This article on the Beanie Baby Bubble has a good explanation. (There are no "sound bites" to quote.)

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  • Would there be any mechanism by which a company's board could vote "in advance" to place a limit sell order that could create up to a specified number of shares at a price high enough that sale would be essentially guaranteed to increase per-share company equity (if company's equity increases, the board could replace the limit order with one at a more appropriate price). That would seem like it would avert the sort of nonsense that occurred with GME.
    – supercat
    Feb 5 at 17:49
  • @supercat probably (though who plans for this??), but does not eliminate the time required by the lawyers and investment bankers.
    – RonJohn
    Feb 5 at 18:04
  • My question is whether there would be any means by which a company's BOD could "print" a quantity of shares that would initially be held in the company treasury, but post a limit order to sell them the moment anyone offers the predetermined price, without the BOD having to take any action in response to the unexpected price jump.
    – supercat
    Feb 5 at 18:17
  • @supercat that is a dilutive offering, so the existing shareholders must authorize it, and it requires lawyers and investment bankers. (You don't just dump a load of shares onto the market without negative repercussion!! Besides, it would almost certainly have to be noted in the firm's annual report.) But this is a Good Question, and so should be officially asked.
    – RonJohn
    Feb 5 at 19:16
  • The shareholders may have to authorize the directors to post such a limit order, but if the shareholders authorize such a limit order at a time when things are sane, the actual execution of the order shouldn't require any particular action--the sales would happen as soon as anyone offered to pay the appropriate price. If a company whose total equity is worth $20,000,000 has 1,000,000 shares outstanding, and then it sells 100,000 shares for $120 each, each share would go from being worth 1/1,000,000 of $20,000,000 ($20) to being 1/1,100,000 of $32,000,000 ($29).
    – supercat
    Feb 5 at 19:55
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One partial answer: some companies are doing this. Bloomberg reported last week:

American Airlines revealed plans on Friday to sell as much as $1.1 billion of stock through what is known as an at-the-market program, which allows companies to issue additional shares at market prices. The announcement came after their stock was up as much as 38% at its peak last week.

Just a couple days earlier, AMC said it had raised more than $300 million through a similar program.

There is a bit of a risk because it does require some setup, and it's possible a company could do a bunch of work setting it up only to find the bubble had burst by the time they were ready to sell. But it's possible.

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