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Genomic Health Inc. Message Board

  • madmanshooter madmanshooter May 16, 2007 2:37 PM Flag

    Let's get positive

    Here is a positive for some of you concerned over the dilution. Right now the float of this stock is so small that many instituional investors don't or can't get involved. Increasing the float may make possible increased and diversified institutional participation in the stock.

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    • has anybody heard when the 3mm shares are going to be priced and what day offered? THANKS

    • Wrong!!

      The price of a stock does not rise because there is pent up demand created by lack of "access" to the stock. Believe me, there are plenty of hedge-funds, individual investors, and other institutions that step in to fill the institutional gaps.

      The ONLY.. and I mean, the ONLY reason that investors buy (raise the stock price) is EARNINGS. Yes, potential earnings, more specifically future CASH-FLOWS drive stock price.

      Its not rocket science, very simple, EARNINGS drive the stock price because a multiple is applied to the earnings in valuating a stock price. The magnitude of that multiple depends on EARNINGS growth prospects.

      Overall, the stock price depends on EARNINGS & the NUMBER of SHARES, in other words.. the EPS (Earnings per share). Increase the number of shares (dilution), and your price will go down. The market proved this a couple of days ago.

      • 2 Replies to cgh12red
      • you oversimplify, cgh12red.

        From a short term trader's perpective, you may be right about the stock's price reaction to a secondary. You should also know that the vast majority of stock pop a bit after actually pricing their secondaries.

        But for long term holders, we knew GHI would have to raise more money....they even said so. It should be no surprise they are selling stock....I actually wished they had done several months ago in the low 20's......but it is what it is...financing to get GHI to the next step.

        The alternative to selling more stock is issuing debt or not selling anything and running out of capital. Now maybe cgh12red actually thought GHI would be self-funding from IPO to cash flow positive, but I doubt it....he's just trying top spook the stock a little so he can make a trade. That's okay....I trade some stocks too....just don't resort to message board scare tactics to help my cause.

        GHI is executing their business plan....and part of their plan called for raising the science, not the stock price, and certainly not the knucklehead traders....

      • Take a deep breath and re-read the first post. Of course earnings drive prices, the price of a stock is the net present value of the discounted stream of future earnings. That was not the point, nor did I suggest pent up demand. My point is something that is undeniable. Many institutional investors, including most importantly those that are considering taking a position in this stock, are reluctant to invest in stocks which are characterized as "roach motels" (you can get in but you can't get out) because of a small trading float. There are definite,undeniable benefits to increasing the float of this company, it has suffered from significant volatility caused simply because there is not enough stock to buy or use to cover a short. Irf and when the FDA comes out the right way on the medical device issue, there will be a short squeeze in this stock like you have never seen.

        The shorts on this board know that, and are particularly frightened.

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