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Comment by lotsofpulp | Hacker News Reader

Market capitalization is a function of share price, specifically share price times number of shares.

You buying 5 shares shifts the demand curve for the share to the right, resulting in an increase in the price. (absent a simultaneous proportional increase in the supply of shares).

While it may not feel like your purchase of 5 shares gave Apple capital, your demand was surely part of the aggregate demand and supply that determines Apple’s share price at a certain point in time, and hence informs Apple’s market cap.

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None of what you just described gives Apple capital unless Apple decides to issue more shares. Given that Apple has been retiring shares, not issuing them, your purchase of Apple stock and subsequent shift of the demand curve actually removes more capital from Apple than if you did not purchase any stock.

We're talking about Reddit, not Apple. Apple has enough cash flow to fund most investments and enough stability to get a decent rate on the bonds it issues. They do not need to sell more shares for capital, although they do create shares for RSUs. Using RSUs (which are later bought back) as a part of compensation is a kind of revolving line of credit, which conveniently scales with the success of the business. That is, when the business is going through tough times and stock price falls, the stock based compensation expenses also fall.

This is a very naive, simplified, and wrong take on a generally well accepted concept.

Point 1: increased demand for stocks will increase the price of it and thus the market cap. Point 2: the higher the market cap of a company the more capital it has available.

I'm saying point 2 is only true if the company wants to issue shares (unless you are talking about second-order effects like cheaper bond rates). Apple is actively repurchasing shares, so they don't have more capital because the price went up.

Yes, it theoretically means they could raise more money by issuing shares, but that's not happening.

Is it more capital if they are using RSUs in compensation?

So, it's depends how they do that. In 2022, Apple seemed to buy all the Apple stock they used for RSUs in the open market. So, absolutely not in that case.

But they don't have to do that. They could issue the shares for RSUs. If they issue new shares (either to sell to the market or to use for RSUs) then the market cap directly influences how much they can generate in work or cash from such a transaction.

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