Price of share will be diluted and most likely to fall next week Prepair for big sell out here is the web site link Hi Kent
The company I am reffreing is shown in the belwo link web site. The are saying in the link site, the shares will increase from 460,000 to 680,000 (amost by 50%). My question is do you think the current price of that company will fall by 1.5% in the near mid term? may be it will be a good approtuinity for buying?
Can't see people buying this with knowing all those shares are coming at a later date! It was kind of like doing a stock split if you ask me except the stock is not $100 a share and you don't get anymore shares just someone else gets yours! Even in the best situation they basically just knocked down the highest stock price they can acheive in half unless they buy back shares in the future but we are really getting ahead of ourselves now! They have to know this is going to be peoples reaction so I asume shares will be coming to market sooner than later!
The price per share pps will fall by significantly more than 1.5%. A quick calculation is to look at Market Capitalization before and after issuance.
As example, market cap is 1000 (pps $2 X shares outstanding of 500) before issuance, then all things remaining constant, the market cap must remain the same after issuance. Assuming the company issues 500 additional shares, the PPS will equal $1 ($1 X 1000) for a market cap of 1000. The problem is the stock market may punish the company and push the PPS even lower. This punishment may be temporary or prolonged. Regardless, historical highs in the stock price will become even harder to achieve because you have a higher number of shares but a range in market cap. Only a fundamental improvement in the business prospects/growth will increase the PPS or market cap and this does not happen in 1 or 2 quarters.
Did you say they would fall only 1.5%....If they actually put that many new shares out there this stock will be under $2.50 in short order! There is going to be a lot of selling now because people are going to run for the hills with that many shares coming to market!