“bUT AMc iS CHeapEr ThAN GmE !!!” Proven Wrong With Data via /r/wallstreetbets #stocks #wallstreetbets #investing

Recently, I’ve been arguing with internet finance professionals over the overused and misunderstood argument of “POPCORN is a cheaper stock to own than GME” or “Why would I buy 1 GME share when I can have 10 POPCORN shares?” or my personal favorite “if both stocks go to $10,000 at one point in the squeeze, than which one makes more sense to buy now you fucking idiot?!?!”.

All of which are valid arguments if you have no understanding of equity or market capitalization. But since our world has logic and concepts, they are unfortunately wrong… or fortunately wrong depending on how you want to look at it.

Here are some examples of exchanges I have had recently that pissed me off enough to spend almost two hours sifting through data and subsequently writing up a “DD” about it. And really, I’m only writing this because I’m tired of having to explain it, so from now on, I can just link this to them instead.

https://preview.redd.it/901kgxd2zcr81.png?width=668&format=png&auto=webp&s=271070d092e60358faab8a9e33e55bd753200886

https://preview.redd.it/zcg55iz2zcr81.png?width=685&format=png&auto=webp&s=aad8385b7a0c05247784da5d62ce52bf253744a3

There are others, but you get my point.

Here is the most basic example of what I’m trying to prove:

If company A has 100 shares for $1 and company B has 50 shares for $2, both of their market caps equal $100. If you buy $10 worth of stock in both, you get 10 shares of company A and 5 shares of company B. Sure you have more shares of company A, but your equity ownership in both companies is the same. You own 10% of the company. That’s equity. Price is arbitrary.

If this is some psyop narrative being pushed by hedgies – congratz. It is working and you got bonus points for wasting my time. But, in the more probable situation… these people are just oblivious and fell for the psychological barrier to entry coupled with the return solely based on future price.

This “trick” is used by many. Recently and more notably, the Qrypto Alt Coin market took this concept by the balls and applied it harder than the investors that bought into these coins applied to Wendy’s a few months after making their initial purchase.

The psychological barrier to entry is the perceived value an investor is getting for his or her money based on the actual dollar price per unit of the investment that they are buying and nothing else. They see this asset as a “deal” because of its low price point and their compulsion to buy is compounded by their unreasonable perception of the ceiling for potential future prices might be. Those Alt Coins with a $0.0000001 price per coin are using this concept to a ridiculous degree, which is why a lot of them got any traction in the first place. Moving on.

I took the closing price of both stocks over the past two years (starting from 3/13/2020) and multiplied the outstanding shares (adjusting for any changes in OS) to get to the market capitalization for both stocks each and every day. Finally, I made a line graph chart to visualize the data because I know I’m writing to an audience that mostly indulges in picture books and I need to keep your attention.

https://preview.redd.it/8yg0ibigzcr81.png?width=1623&format=png&auto=webp&s=2332c19385c9ffba89b1a82da1ce765c18c08a54

The X-axis provides dates starting from 3/13/2020 to 4/1/2022 and the Y-axis provides you with the market capitalization. The red line represents POPCORN and the black line represents GME. I’ve chosen the colors for the two stocks with coincidence and appropriately… ;). Yes, before the sneeze in January 2021, GME was the more expensive stock. But after the sneeze and the run-ups in June, this is no longer the case. In fact, for the better of half a year, POPCORN was overwhelmingly more expensive to buy than GME. It was only until 1/27/2022 that their market caps were essentially equal to one another and their equity values per dollar were approximately 1 to 1. From 6/2/2021 (the date that POPCORN reached its peak) to 1/27/2022, popcorn was on average 26% more expensive on any given day than GME and maxed out at 43% more expensive on 9/10/2021 when the market capitalization of GME was $14.5B and POPCORN was $25.7B.

If you would have bought $1,000 worth of both stocks every day since 4/1/2022, you would have made $254,000 worth of buys in each stock.

(254 trading days since 4/1/2022 multiplied by $1,000)

I’m using 4/1/2021 as the date since it is the aftermath of the GME sneeze and before the POPCORN run-up to its peak on 6/2/2021. Plus it is exactly one year, so… I think it is a fair place to start.

As of last Friday’s close, 4/1/2022 you would have 1,598 shares of GME and 11,156 shares of popcorn valued at $263,595 and $259,924, respectively. It gets worse for popcorn.

Now, let’s do another hypothetical and say you missed the run-up in January for GME and the run-up in popcorn in June. You saw the crazy amounts of money people were making and wanted a piece of the action, so you FOMO in both stocks, not knowing any better. You do the same exercise as I mentioned previously by buying $1,000 worth of both each day starting on 8/2/2021. This time, there were 170 trading days. So you purchased $170,000 in both stocks.

As of last Friday’s close, 4/1/2022 you would have 1,144 shares of GME and 6,458 shares of popcorn valued at $188,767 and $150,480, respectively.

In this scenario, not only are your GME shares worth more, you are actually losing almost $20,000 on POPCORN. This only gets worse as you move closer to 1/27/2022 when the stock’s market capitalizations finally converge.

In the past 30 trading days, on average GME has only been 3% more expensive than POPCORN. So now would be a better time than ever to convert equity to GME.

https://preview.redd.it/nztqxpt8zcr81.png?width=516&format=png&auto=webp&s=0bc5f575d1bd9eb74ae0d7f4b598f4de2935c853

But price points shouldn’t be the only thing you consider. If you are a POPCORN holder and you don’t realize that GME has set itself up with multiple catalysts in the coming months, you need to open your eyes. This may be the last time to get into GME before it explodes my tits. But this really wasn’t the purpose of my post. I simply wanted to prove that POPCORN is not cheaper than GME with irrefutable evidence. But it’s your money. Do what you want. NFA.

WDK

Submitted April 03, 2022 at 08:39PM by wetdirtkurt
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