Consolidation? Let’s call it what it is—a costly facelift that almost always ends up backfiring on shareholders. Over 95% of the time (data-backed!)
Pretty much every time there is a consolidation you can get the stock for cheaper (relative percentage of the company ) after the consolidation. ie if PEN did a 20 to 1 consolidation, it was trading 11 cents when the consolidation was announced so has already fallen (no doubt a lot of it to do with pending consolidation), but its trading 0.086 now, with a 20 to 1 consolidation, the same price after would be $1.72 cents, but you can bet your bottom dollar you would be able to pick it up under $1.72 cents after consolidation, theres 1000s of examples of consolidations leading to cheaper prices directly after a consolidation, cant think of one example of it going higher straight after.
Infact I challenge those reading this to find an example of a consolidation not leading to lower prices directly after a consolidation (talking days, weeks , months not years) hard to find even 1 example , but plenty of recent examples of it working out bad.
Check out some recent ones WSI, ZLD, MOM, MDC, NUH, Ci1, TPD, MGT, THR, Ti1, KDY, MXC, GDA, TOE, RR1, ADX, AUZ, CZN, WNX, FGL, 1MC all these consolidations lead to new all time lows. Even big multi-billion dollar companies that do them, like PDN another uranium company did one this year and is still trading lower after consolidation, lost all gains on 2024 despite it being a bullish year for uranium.
The reason I say directly after consolidation like the days, weeks, month rather than looking back too long like 2+ years and giving examples of a price higher doesnt work because you cant really say look at XXX did a consolidation and now 3 years later they are 200% higher when in those 3 years there could of been anything like bull run or they hit gold and started mining, its hardly the cause of the consolidation that would have lead to the higher price, they would have got the higher price regardless.
The best way to see the effect of consolidation is the trading months after, where everything remains equal and price has stabilised, the only change being the consolidation, as then you can see a direct before and after of consolidation without having to take into account market changes and announcements that would have fundamentally re-rated the company anyway. And when you do look at those examples, even with real multibillion dollar companies like PDN a good example to compare PEN to, they have gone down for months and months after consolidation.
Really no reason for consolidations, takes up time and money in admin, gives the share price more room to fall, the only real reason is to make the price cosmetically higher (but lower market cap) and also allows management to do a cap raises enticing new investors with a cosmetically higher price. Whats the upside apart from this?
Genuine question, I would ask why do a consolidation, whats the purpose?
Tidy up the register ? NO, register stays exactly the same, same amount of holders with same value, unless of course market cap falls which is not good for shareholders. Attract new investors? NO. What investors are your tricking with a price of share rather than market cap? Only retail, real Investors look at market cap and financial statements, look at MMI a "penny stock" that was trading 1 cent last year, did they need to do a consolidation? NO they just made good business decisions and the price went up and they could attract institutional investors even at 4 cents, so the excuse of needing a higher price to attract investors is just not valid. The only reason that makes any sense is if there is a dual listing planned, or they think they can trick retail to invest at a cosmetically higher price.
Any time there is a consolidation its a red flag for me and I can get out and then get back in cheaper post consolidation, which works EVERY time, yet to see an example where it doesnt work, please if you think conolidation is a good idea, show me one example I couldnt of sold out when conolidation was announced and got in cheaper. Its already worked here with PEN, sell on the announcement at 11ents can get back in now 21% cheaper at 8.6, and expect another fall directly post consolidation.
Bad move from this management.
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