spud date, page-40

Ok so it appears there is many here think that when you increase the amount of shares in a company you also automatically increase the Market Cap. Remember in the case we are talking about is the issue of performance shares for nil consideration

So therefore if that if that is the case, if you bought one pie for two people and you invited a another person to share the pie, by magic you would have another half a pie for nothing making a total of 1 ½ pies yet you have only paid for one!

So I am at a loss to explain the confusion this subject has created but by weight of numbers and experience as per the last poster on this list it looks like I am the one confused. If this is the case I will remove myself from the forum as I could be accused of misleading everyone adding to the moderated post for ramping when previous posts and stock broker reports had said the same thing.

Previous posts on the subject
Angellus 2012
“Sorry, I'm missing something, how can more shares be added without lower Market Cap?
Cap was reduced after entitlement offer due to more shares”



If shares are issued at the same price as the current price the MC would go up.

Hinklestab
“Hmm wouldnt the market cap actually increase?
say 100,000 shares on issue
performace is achieved and they put in another 10000 shares
wow now there is 110,000 shares
if share prices remains the same (which it wouldn't it would most likely drop due to people taking into account the dilution effect of the issue)
*lets say were at 20c
100000 * 20c = 20000
110000 * 20c = 22000
See market cap increases, although the shares should drop because they would be worse less then before the issue, this isnt always the case. As we know the market isn't always rational. :P”


Hmm a bit both ways.

Bluntaxe
“Am I being sucked in here?
MC = share price x number of shares
NOT
MC/new number of shares = share price
Really?
Maybe it is 1st April !!!!”

Its not the 1st April so I agree it’s a worry.

Reichman

G'day Bukka

Market Cap = numbers of shares on issue, multiplied by the share price.

With the example you put forward, upon the one performance share becoming a tradable entity, the market cap would automatically (really?)rise from $100 to $150... The two shares on issue with an SP of $50, immediately become three shares with an SP of $50, thus the market cap must initially rise.

In a more realistic shares on issue example, shares may well get sold down a touch and the SP may indeed drop slightly. But the key here is the SP can't/won't change until one of the three shares are traded for a lower or higher price than the current SP of $50.

Hope that makes sense.

Thank you for sharing your knowledge there Reichman. Surely you are having a lend of us.
So based on your example if the Directors issued a few more Performance shares to themselves in addition to the existing ones upon reaching a certain market cap then they could theoretically get to the next target level for more performance shares by doing nothing more than issuing shares to themselves by virtue of the fact in your opinion the market cap goes up as more shares are issued, as their Performance Shares are linked to Market Caps.



www.opportunetime.com



stock dilution
Category: Stocks

The opposite of a share buyback. Occurs when a company issues new shares to raise money, usually lowering or "diluting" the value of existing shares. Stock dilution increases the supply of shares outstanding, decreasing the price of shares outstanding. For example, say the market cap of Company A is $1 million, and Company A has 1 million shares. Thus, each share is worth $1. Now assume Company A buys issues 1,000,000 additional shares of stock. After the dilution, the market cap of Company A still will be $1 million. But now that there are 2,000,000 shares available to the public, each share will be worth $0.50. Therefore, the remaining shareholders will see the value of their investments halved. Unlike share buybacks, stock dilution hurts existing shareholders, except in rare cases. One exception would be when a company dilutes its stock to raise money to merge with another company. The net effect for shareholders is ambiguous, but would be positive if the value created by the merger