Bitcoin Held By Public Companies Now On Par With Past Market Cap
In early 2020 the Securities and Exchange Commission ruled that most publicly traded companies cannot use a “hedged” position of their own funds as security for stock. A few months later, a federal judge ruled in favor of the SEC and struck down such restrictions on company ownership. Since then many companies have begun to use these funds as a sort of trading vehicle. However, with most of the major corporations now holding the same number of shares as the private market and with the price per share rising in tandem with the economy, it is not clear how investors can make money with this type of security today.
This situation has been a sore spot for many private investors who were used to making a killing in the market during the dot-com bubble. Investors had no problem riding this market until it burst, because the stocks were priced at a level that made the returns in real dollars very attractive. However, when the bubble burst and the market was forced to retrace from the heights it had reached before the bubble burst, many private investors lost money.
Even though the SEC decided that the hedging positions could no longer be deemed a good way for companies to hedge their exposure to the price of the market, hedge funds still exist and some are now using the virtual world of the Internet to allow them to do so. The problem is, unlike the stock market, where investors can buy and sell shares in one day, companies with an Internet hedge fund can do that over several months.
When the bubble burst, many companies who had hedging funds had their value lowered due to the large number of shares they had on their books. While this may seem to be a minor setback for those who are trying to capitalize on this type of investing opportunity, a significant portion of these companies’ financial statements are based upon the price per share that the share prices had previously reached before the crash occurred.
Due to the fact that there is very little risk involved with trading in these types of companies, many investors are choosing to do business with these companies on a small basis. Many of the larger companies that have managed to hold onto their shares are paying very large dividends and investors that are looking to make money off of this industry are taking advantage of this fact by purchasing large quantities of shares at below market value.
Some of these companies are selling their shares in order to make room for newer or larger ones while others are holding large amounts of shares to protect themselves against a possible drop in the value of the price of the currency. As the years go by and the size of these companies continues to increase, the number of shares increases, this is not going to be as attractive to investors as it was in the past years. It will be interesting to watch this trend play out as the economy moves forward.