Share Consolidation - Legal Theft

sptrawler said:

They consolidate to lift the share price, it makes the company look like it is doing better and also some larger investment companies only buy into shares above a minimum entry price.
Also for the casual observer, the consolidation doesn't show up, so wow last time I looked they were only x now they are triple that. lol

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Just like a share split, the charts and all the historical information is adjusted to reflect the change.

eg, after a consolidation you don’t see the price rise in the chart, the charts are adjusted.

invitation extended , let's see who comes

cheers

Value Collector said:

Just like a share split, the charts and all the historical information is adjusted to reflect the change.

eg, after a consolidation you don’t see the price rise in the chart, the charts are adjusted.

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NOT always , some places are rather lazy , i have been saved one or twice by tracking the shares on issue ( if they don't change their name as well )

the extra bit of caition can save a few tears later

i noticed a member linking Delisted.com , that site has saved me from grief a few times as well .. well worthy of a bookmark ( imo )

TiminOz said:

USEFUL EXPLANATION about STOCK CONSOLIDATION for NEWBIES (I hope),
BUT ALSO A QUESTION

Hey guys,

(For the purposes of educating my newbie self,)

I've now had a really good read about
SHARE CONSOLIDATIONS / REVERSE SCRIPS / REVERSE SPLITS (all the same thing).

My understanding is:
1) Technically, there is no drop in the value of your holdings
2) However is it potentially a warning of problems which MAY reduce the value of your holdings (even soon)

Expanding on 1):
If they turn your five $1 shares into 1 share, that 1 share is priced at $5.
So the value is exactly the same.

[SIDEBAR: Old mate mentioned in the SMH seems to have misunderstood what was going on: not reaslising that each (consolidated) share was also WORTH proportionally more...So he thought he'd immediately lost money, I think....The expert replying to him seems to have noticed this and advised him to consider consulting a knowledgable broker from now on!

But of course, the reverse-scrip did not auger well and he later lost money because of the problems with the company.

[SIDEBAR WITHIN SIDEBAR: regardless of any nefarious conduct, it's also clear that - at least for a while - people thought net advertising would kill TV advertising...I myself always doubted this. I've clicked on two ads in 20 years! TV ads are far, far more noticable!]
]

The reason they do it is mainly to increase the headline price of the shares,
especially to:
- make them seem more attractive, which is yes, pure marketing
- to prevent delisting on a certain exchange (because the price is too low)
- to prevent falling off the list of potential buys of certain players (ditto)
- because they are making some kind of new offer (eg a subsidiary???), which they (genuinely?) believe is worth more and so they don't want the poor current price of their stock to (unfairly?) influence that?
- and perhaps other reasons I can't remember lol !

(A few articles about all this on Investopedia)

Please feel free to correct me if any of this is wrong,
...and question below!

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TECHNICALLY , you are correct , but investors are human and many have an opinion that say , stock 32z is a dud , not matter what the stock price is , impatient sellers want to leave at any price they can get , but few want to buy ( at all ) .. so , since 0.1c is the official lowest share-price an ASX listed share price can go to , that is the trend ( MOST ) share consolidation stocks take ... remember the share was drifting lower BEFORE the consolidation because it wasn't exciting buying interest , unless management improves that disinterest will continue but the share price has more room to slide .

in my experience less than one in ten resist that trend

one exception was BSL a few years back

from June 2011 to June 2012 i was buying BSL from $1.19 down to 27c and the share become 'a trader's toy ' ( still had huge assets and market cap , so instos could lend the shares out , and @ 30( ish) cents a share even retail traders can have fun and profit

so BSL management decided to do a consolidation to reduce the attractiveness to short-term traders a six into one consolidation and about the same time did a capital raising , this tactic worked for BSL ( probably because is still had assets and a growth path ) but often fails elsewhere .

ANOTHER reason some ( internationally ) listed companies choose to consolidate is because of requirements to stay listed on that stock exchange , from memory some US exchanges demand the share price stay above $US 10 so the Aussie version of that share ( if dual listed ) is ten ASX listed shares to one US share

Interesting thread and good read.

I'm a system trader so generally don't dig too deep into this stuff. However this thread has peaked my interest in two of my current holdings that have recently gone through a consolidation. Those holding are AVG and COG. Overall this consolidation hasn't really impacted me significantly, I still hold marketable parcels and my open profit as a percentage still remains pretty much in line with the pre-consolidation open % profit. AVG consolidation even had a small little benefit of returning some capital.

So I'm curious, from those in the know and those that closely followed the AVG and COG consolidations--where these companies trying to fix up any sins of the past?

Stay classy ASF

i DON'T follow either of those two closely ( but maybe should pay more attention to AVG in the future , cheers for that i need a replacement for CCL , maybe this will do )

from my limited knowledge on AVG 'sins' might be a bit harsh , with a rival like fund manager darling TWE , it was always in the shadows the good reactions ( in the wine trade ) went to TWE first the others sometime later , and the bad news hit the small players first ,

other members will give a better opinion but i would call AVG 'a second hand Rose' where prestige is everything ( the wine industry )

cheers

i could be wrong but COG seems to have changed it's business model since i last looked so can't help there

divs4ever said:

NOT always , some places are rather lazy , i have been saved one or twice by tracking the shares on issue ( if they don't change their name as well )

the extra bit of caition can save a few tears later

i noticed a member linking Delisted.com , that site has saved me from grief a few times as well .. well worthy of a bookmark ( imo )

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If a share is say 10 cents on the 1st of March, and the do a 1 for 10 consolidation on the 2nd of March, none of the credible data providers, stock broking sites or the ASX will show charts that make it look like the stock suddenly went from 10 cents to $1.

The charts and data tables will all be updated, and it will now show the share as being worth $1 on the ist of March.

if you are talking about delisted stocks etc I don’t know about that, but more original point is still true, you don’t own less of the company, just the number of pieces changes.

MovingAverage said:

Interesting thread and good read.

I'm a system trader so generally don't dig too deep into this stuff. However this thread has peaked my interest in two of my current holdings that have recently gone through a consolidation. Those holding are AVG and COG. Overall this consolidation hasn't really impacted me significantly, I still hold marketable parcels and my open profit as a percentage still remains pretty much in line with the pre-consolidation open % profit. AVG consolidation even had a small little benefit of returning some capital.

So I'm curious, from those in the know and those that closely followed the AVG and COG consolidations--where these companies trying to fix up any sins of the past?

Stay classy ASF

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The main reason for consolidations is for cosmetic reasons, Some funds actually have rules against their managers buying into shares less than $1.

So to make their shares more appealing, and avoid looking like a penny dreadful, they can consolidate their shares into a more valuable unit over $1.

In general though, if a share price has drop so low that management are considering a consolidation then things must have been going wrong for a while.

of course having your share price rise so high that management need to do a share split is better than having the share price drop to where it needs to be consolidated.

Value Collector said:

The main reason for consolidations is for cosmetic reasons, Some funds actually have rules against their managers buying into shares less than $1.

So to make their shares more appealing, and avoid looking like a penny dreadful, they can consolidate their shares into a more valuable unit over $1.

In general though, if a share price has drop so low that management are considering a consolidation then things must have been going wrong for a while.

of course having your share price rise so high that management need to do a share split is better than having the share price drop to where it needs to be consolidated.

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i have bought several shares that traded under $1 at the time ( PME , NST , EVN , AX1 was RCG back then ) and all went on to bigger and better things without the need of a consolidation , if your company is well run somebody similar to me will find it and put a few $$$ into it when the price is tempting ( by the way all of them were paying divs while under $1 when i bought them )

that might be a handy screen for those starting out

share price under $1 and pays divs. ( more than one previously ) and THEN start researching from there , your $500 buys a useful number of shares ( surely you are not going to put big $$$ omn a micro cap as a beginner )

now some funds once they buy in get rather pushy ( even want to impose directors and ) are those the funds you want interested , now SOL is a well known example of that but MOST times it all ends well , some others end badly for the smaller investor

i would suggest that the comsmetics style consolidation should have you looking ( examing ) the company very closely , it may be desperation or just some mew ambitious director but remember one thing SHARE CONSOLIDATIONS COST MONEY AND TAKE TIME ... ALWAYS are those resources being wisely used , now a less common consolidation theme is to consolidate a company making tiny profits but can pay dividends once the consolidation is all settled in , once a company can pay regular divs , the momentum MIGHT start .

regarding share splits .. they are very rare in Australia and SOMETIMES investors ( imexperienced ones ) are confused so the share price DROPS for a short while giving you a better entry .. i was hoping for that when MLT split but i missed my target , meanwhile BKL so far has steadfastly refused to do a share split .

and yes normally the share price is in the doldrums for a fair while before a share consolidation is organized ( except those US shares i was talking about earlier where the company NEEDS to stay listed on the exchange so must stay above a certain price )

Value Collector said:

If a share is say 10 cents on the 1st of March, and the do a 1 for 10 consolidation on the 2nd of March, none of the credible data providers, stock broking sites or the ASX will show charts that make it look like the stock suddenly went from 10 cents to $1.

The charts and data tables will all be updated, and it will now show the share as being worth $1 on the ist of March.

if you are talking about delisted stocks etc I don’t know about that, but more original point is still true, you don’t own less of the company, just the number of pieces changes.

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but SOME of those data feeds are not credible , slightly off topic , but one platform i trade with uses the Dow Jones Newswires and the messup with ticker codes on the news feeds has been going on for at least 3 years , normally it will prefer a NZ ticker code over an ASX one , but the confusion can get worse than that .. sometimes you have highly traded shares confused with a share that may not trade twice a year ( and it snags the occassional pro-trader as well )

so Dow Jones Newires can make repeated errors for 3 years ( plus ) despite various forum member 'comments ' ( some might say sarcasm )

how many others make such slip ups say once a year easy enough to miss a release during reporting season

now the experienced folks would glance at a stock and see 32X at $1.50 and go WHAT THE ??? he would know it hasn't made a profit in 4 years and has never been on his radar before , but the novices especially when the market is roiling , maybe not they MIGHT mistake for a rocket

delisted stocks ALSO gives you a brief history of shares that change their names , go in and out of administration , change from on stock exchance to another , worth the effort of bookmarking the site , and when you are digging around for new penny stocks on the weekend , worth double checking that new gem ( to make sure it isn't a mutt with a new collar )

Share consolidations can be a way to bring a stock back from the grave sometimes. Not talking some theory, this happens in real life on rare occasions.

Recent example is Ookami Ltd (OOK) which went into a trading halt for 2 years and did a massive consolidation to reduce the issued shares and relisted. I think the stock was likely to be de-listed but bought back to the exchange with the massive haircut.

I guess better to get 10c on the dollar and re-list on the exchange than being totally wiped when a company bankrupts itself (technical term is voluntary administration) and de-lists.

What I have noticed with consolidations is, the consolidated shares trade under a deferred settlement (Def set) ticker for a week or so under a slightly different ticker code, usually 2 letters added onto normal ticker.

When this ticker starts, obviously there's no preexisting orders in the market and the last traded price isn't shown. Brokers show last traded price as $0.00

I believe this is where some stocks come undone due to unscrupulous types entering buy orders around the preconsolidated price, that is, the last traded price.
Seemingly, there's some dumb sellers that go in for the same price! (and scammers...)

When I witnessed this activity, I placed a buy order at what should be the new consolidated price, based off consolidation ratio and last price traded.
I also added a sell well above the last traded X consolidated price.

This alerts others to the shenanigans of dog tactics, hopefully.

The whole potential scam thing could be avoided if the ASX and ASIC agree to use the last traded price multiplied by the consolidation ratio to provide an adjusted last traded starting price.

It seems such a simple thing to do to stop unscrupulous activity around consolidations.

Maybe we should start a petition?

frugal.rock said:

What I have noticed with consolidations is, the consolidated shares trade under a deferred settlement (Def set) ticker for a week or so under a slightly different ticker code, usually 2 letters added onto normal ticker.

When this ticker starts, obviously there's no preexisting orders in the market and the last traded price isn't shown. Brokers show last traded price as $0.00

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Maybe when T+2 goes the way of the dinosaur, there will be no need. Should all happen 'in a flash'.

frugal.rock said:

I believe this is where some stocks come undone due to unscrupulous types entering buy orders around the preconsolidated price, that is, the last traded price. Seemingly, there's some dumb sellers that go in for the same price! (and scammers...)

When I witnessed this activity, I placed a buy order at what should be the new consolidated price, based off consolidation ratio and last price traded.
I also added a sell well above the last traded X consolidated price.

Click to expand...

I have noticed the same price action around shares going ex-dividend, on occasion. Doesn't seem to last more than a few trades (minutes/ hours).

Norseman Gold PLC now Tulla Resources PLC ASX: TUL had a consolidation of one share for every 600 shares. In this case like some others, shares were issued to the loan companies to such an extent the eventual share price would have started on the ASX, on its return after many years, at 0.15c a share with a spread of 0.1c - 0.2c - the lowest allowed - so the share would only rarely trade at all. Not that the ASX would have accepted that anyway.

Tulla Resources PLC for some reason retains its London registration. Even though the company's investments are all Australian and its directors - there is no London quotation. Nearly all its shareholders are UK based with very small holdings under $500. So the oddship Tulla sales on.

Fairdinkum, I recently held 3 million shares in a company & in the buyers column the was like 150 million being purchase at 1 point in time at 0.002 cents and at 0.001 250 million & at point 0.003 of a cent in the buyers column 150 million & those shares fell from 0.007 at there highest point & it seemed to me the market (or ASX) wouldn't trade them up for someone to make 150k in 1 point of a cent & the entered a stale mate situation & I have no doubt now that the market was manipulated to produce that effect (stale mate).

I don't know if it was a Foreign actor or several or the company itself that created that situation but there was definitely a market manipulation to drive to stock down so no-one could get out, which I was seeking to do! There was a 10 to 1 consolidation my 3 million turned into 300k which I sold for $600 out of anger! They stole my money or at the very least someone did. I lost only 10k I feel for the other people here that have lost 100's of K's. Consolidation more than once in 5 years in organised crime "in my view" that's my humble opinion!

GazzMoss said:

Fairdinkum, I recently held 3 million shares in a company & in the buyers column the was like 150 million being purchase at 1 point in time at 0.002 cents and at 0.001 250 million & at point 0.003 of a cent in the buyers column 150 million & those shares fell from 0.007 at there highest point & it seemed to me the market (or ASX) wouldn't trade them up for someone to make 150k in 1 point of a cent & the entered a stale mate situation & I have no doubt now that the market was manipulated to produce that effect (stale mate).

I don't know if it was a Foreign actor or several or the company itself that created that situation but there was definitely a market manipulation to drive to stock down so no-one could get out, which I was seeking to do! There was a 10 to 1 consolidation my 3 million turned into 300k which I sold for $600 out of anger! They stole my money or at the very least someone did. I lost only 10k I feel for the other people here that have lost 100's of K's. Consolidation more than once in 5 years in organised crime "in my view" that's my humble opinion!

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there are SOME ( too few for my liking ) stocks where a share consolidation is a good thing

BSL was one winner ( they consolidated into a $2.40 share 6 into 1 and they are now around $20 )

not really pivotal for the share price where MQG 'consolidated ' but it was only a tiny adjustment

but yes there are some interesting games going on in the share market ( and they are NOT limited to stocks selling for less than a cent each )

GazzMoss said:

Fairdinkum, I recently held 3 million shares in a company & in the buyers column the was like 150 million being purchase at 1 point in time at 0.002 cents and at 0.001 250 million & at point 0.003 of a cent in the buyers column 150 million & those shares fell from 0.007 at there highest point & it seemed to me the market (or ASX) wouldn't trade them up for someone to make 150k in 1 point of a cent & the entered a stale mate situation & I have no doubt now that the market was manipulated to produce that effect (stale mate).

I don't know if it was a Foreign actor or several or the company itself that created that situation but there was definitely a market manipulation to drive to stock down so no-one could get out, which I was seeking to do! There was a 10 to 1 consolidation my 3 million turned into 300k which I sold for $600 out of anger! They stole my money or at the very least someone did. I lost only 10k I feel for the other people here that have lost 100's of K's. Consolidation more than once in 5 years in organised crime "in my view" that's my humble opinion!

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by the way

welcome to ASF
i hope your outcomes get better