Consolidation of shares

[Fool]

Say a company consolidates their shareholding, ie, they had 500,000,000 on offer and they consolidated 10 shares into 1, to give them 50,000,000 shares on offer....

What does this acheive?

It can't reduce the liquidity of the share, because technically there is still the same number of share holders.

The only positive I can think is it turns a "penny dreadful" into a $1 + share, that seems less dodgy?

 

[Fool]

anyone?

 

[Buster]

Hey Fool,

Sorry mate, cant help you..

Say a company consolidates their shareholding, ie, they had 500,000,000 on offer and they consolidated 10 shares into 1, to give them 50,000,000 shares on offer....

What does this acheive?

It can't reduce the liquidity of the share, because technically there is still the same number of share holders.

The only positive I can think is it turns a "penny dreadful" into a $1 + share, that seems less dodgy?

Although I'd be interested to know, as WEB has just consolidated 4 to 1..

Cheers,

Buster

 

[Fool]

The only thing I think it does is turn a stock that's been very diluted over the years into something that seems less dodgy.

Extract did it a while ago, consolidated I think 10 stocks into 1 but it's actually gone backwards from where it was trading initially before the consolidation.

So for Extract, it did nothing.

I could imagine if a company had a huge number of shares on offer and actually HAD something, it could assist the credibility of the company to do the consolidation prior to announcing what they had.

In fact, it would probably be a good sign that the management beleived they had something.

But if they just started diluting again it would be a signal for me to bail on that stock.

Be interested to hear others thoughts on it anyway.