spud date, page-42

As I see it Bukka, UNTIL any shares are traded, the market cap must initially go up upon the issuing of more shares. How can it not?

Let's use a more realistic example.

A company has 100,000 shares on issue. The SP is currently 50c, so the market cap is currently $50,000. The company has decided to issue 20,000 performance shares to certain people, if and when the market cap reaches $100,000 (SP $1) sometime in the future.

So, without any shares having been issued in the interim, if the companies SP ever gets to $1, the $100,000 market cap criteria would have been reached.

This automatically sees 20,000 more shares on issue. Now 120,000 shares. Upon the issuing of these shares, given the SP is at $1, the market cap automatically becomes $120,000.

The SP doesn't automatically drop to 80c because there has been a 20% dilution. It may well drop an indeterminate amount from future selling, but you don't wake up that morning and go to your Commsec (or whatever platform you use) trading site and see the SP has dropped to 80c without a share having been traded.

It's only the subsequent trades once the market cap criteria has been reached that will determine whether the market cap stays at $120,000, or goes lower or higher.

I agree that MOST times there would be some selling and the SP would likely drop. But until any sales go through after the announcement, what % that will be is still unknown.

Let's use QPN's current situation as the best example.

QPN's first performance share criteria MAY get reached from the euthoria created of a drilling date being announced.

Then, on the same day as the performance shares enter the marketplace, what if QPN announce that they have hit a copious amount of Oil or Gas.

The wider market would likely become very bullish about QPN, with the result in this situation most likely being/seeing the SP not fall, but actually appreciably rise.

I understand in gerneral terms where you are coming from, but if we used your small example, you don't wake up the next morning to have your 50c share now at 33.3c on the trading platform. You might think that's all the share is worth, but it's the market, the subsequent trading that ultimately decides.

As illustrated above in the not inconceiviable possible future happenings with QPN, if the company timed great news very well, the SP (and as such, the market cap) could very well rise upon the issuing to the market of the performance shares.

Happy to be rebutted.