The Nickel Market Almost Broke

A fact about financial markets that occasionally produces strange results is that the total market value of a thing is, conventionally, (1) the amount of that thing that exists times (2) the price of the last trade. So Bloomberg tells me that there are about 304.5 million shares of GameStop Corp. stock outstanding, and they closed at $25.60 yesterday, so GameStop’s market capitalization — the total value of its stock — is 304.5 million times $25.60, or about $8 billion. Nobody recently bought or sold all of GameStop for $8 billion, and if somebody did, the price would probably not be $8 billion.1 But if you wanted to buy or sell one share of GameStop, the price you’d pay or get would be about $25.60, and you can multiply.

One type of strange result you can get from this is that if you have some weird small stock or cryptocurrency that doesn’t trade very much, you can give it a very large market capitalization by selling one share or token to your buddy at an inflated price, and then you can go around telling people “ooh look at the huge market cap of this thing, it is so valuable, it must have discovered a cure for cancer,” and maybe you can do bad stuff with that. We have talked about the infamous New Jersey deli that was worth $2 billion. It wasn’t, of course, but its stock didn’t trade much, and it traded at a high price, and you could multiply. Allegedly this supported a fraud. Or we have talked a lot about this in the context of cryptocurrencies, which are easy to produce in huge quantities and then sell to your buddies; the downfall of FTX and Alameda seems to have involved inflated market values of tokens that FTX had invented and mostly held itself.