QuoteOriginally posted by: ppauperas stated by KT, a company can issue more stock.If it did this via a prospectus (eg a rights issue or a private placement or an additional public offering), knowing that it was likely to go bankrupt and failing to disclose this, in many jurisdictions this would be considered fraud, and the directors would be looking at civil action and/or jail time first, MANY large companies sell shares constantly in the market. They do this by getting authorized to sell a ton of shares. But they don't sell them in one shot. Instead, they slowly dribble out the shares over a period of years. Second, when a company gives employees shares of stock (or stock options), it is effective selling the shares to the employee in exchange for labor. So any company who gives stock compensation is effectively "shorting" itself. Third, companies sell (or short) their stock, not because they believe it is going down in value; they sell because they need to raise capital to AVOID going bankrupt. If it is illegal for a company to go bankrupt shortly after selling stock, about thousands of internet start-up executives would be in jail right now, because many internet start-ups in 1999-2000 went bankrupt in 2001.
Last edited by KackToodles
on February 5th, 2010, 11:00 pm, edited 1 time in total.