I see what your saying, basically just an issue with my wording and sounding matter of fact, Im sure there are examples out there of market cap going up post consolidations, there would have to be, I just havent come across them yet. Im just making some generalisations that generally true, and I would say close to 95%+ given I can provide 25 examples off the top of my head and yet to find one that hasnt dipped in market cap post consolidation.
I know in theory its meant to make no difference, as its only the SOI thats changing, nothing else, however the reality in practice is different, stocks dip, there is more room to fall, and I think it signals to the market that there are more cap raises (at a discount) to come. If not why do it? The only legitimate reason is for dual listing with price minimums in place, but OSL is not in that position.
The best way to see the effect of consolidation is the trading weeks and months after, where everything remains equal and price has stabilised, with the only change being the consolidation (no news, no huge market changes, etc), 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, they have gone down for months and months after consolidation.
Looking back too long like with this price line or AIG example talking 10+ years and giving examples of a price higher now doesnt work because you cant really say look at XXX did a consolidation and now look a decade later they are higher when in those 10 years there could of been anything like bull run or they hit got better margins, a tonne of other reasons and its hardly the cause of the consolidation that it went up, they would have got the higher price regardless.
I havent looked at your examples, but im assuming that you say have done fine subsequently we are talking years afterwords (given you have provided examples over a decade ago) . Show me a chart of the stock with before and after consolidation clearly marked, if you find one where it hasnt dipped it would be the first one Ive seen in literally a decade of this debate.
The reality is simple: consolidation doesn’t create value; it only reshuffles the share structure. What follows is the real story dilution, further capital raises, and a declining market cap. If 95% of the time a certain action leads to destruction of shareholder value, why on earth would management be for it? To keep themselves employed is really the only answer.
Exactly, the company has just signalled to everyone that there are more capital raisings to come at discounts. a 400-1 consolidation is ridiculous, gives the stock so much room to fall, especially being so illiquid (we will have less than 12 million shares on issue after this, would have to be one of the lowest SOI on the whole ASX) an illiquid stock doesnt attract investors.
Again if an action doesnt bring value why do it? They are just making the price higher, so they can raise more, keep themselves paid, its obvious, very frustrating im sure to all the investors, especially those not too long ago that invested at 1 cent (equivalent to $4 post consolidation.)
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