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14/02/20
09:24
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Originally posted by 2020hindsight:
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Yes if poor management causes downward pressure on value then the SP will be able to crash more than it can now. Yes if consolidate that opens the gate to further value loss. Yes share buy backs increase the SP but also reduce shares on issue but then may increase underlying demand due to perceived SP increase but not really as investors know it’s due to buyback not value growth. Just like buy backs creating an artificial reduction in shares on issue and increase in SP a Consol does exactly the same but in one big instantaneous chunk. Other that time taken, and removing changes in business fundamentals there is no difference in impact between buy back and Consol except buy back depleted the cash in the company bank. If the co has no cash they cannot buy back but can Consol so Consol is an available lever whereas buyback is not. I did not suggest a 100/1 Consol I suggested 10/1 for a reason. 100/1 reduces share liquidity and generally includes many unmarketable parcels which then are compulsory bought back leaving mainly larger stickier holders thus less share volume to trade. Over consolidation also subsconsiously removes lots of this end investors who prefer hundreds of thousands of shares for their investment to ten. Consolidation can put the SP to a level that certain Instos can and even must consider them for sector funds. Generally however this only kicks in at 50c share price. Many placement type family office investors will however go for shares at 5c and most traders need 5c plus or at least 1c plus so there is price volatility available to trade up and down. It’s tough to trade 0.1c down to trade it up again so you may lose 50% investor trades by lising the traders from a stock. The above are all technical considerations in share theory, they are not at all considering real SP impacts due to operational impacts like generating real operational outcomes. As I said, if the company doesn’t perform then any of these technical levers are useless. Thats why I said they must first perform operationally by fast tracking the BM upgrade so they produce and can continually produce bulk product. Even then they must create market sector penetration and margin from revenue as that’s the only way with current techs they can push the SP. But obviously I’m Einstein the Idiot and by that definition know nothing of the mechanics of listed stock price levers. It remains my opinion that in ECTs current position of floor SP, tough fossil fuel headwinds and far from productive capacity that some form of technical lever could be used. After all Corps Act, ASIC the regulator and ASX rules all allow both buyback and Consol as relevant and rational levers. Whether individual holders or HC posters opine one way or the other (Consol or buy backs or nothing) is all valid opinion. None is fact.
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The only reason for liking a share consolidation is when in ECT's case EACH of the directors own at least half a billion in script i.e. 6.25%+. So if they cannot organise the company to make real money then they will have to go home and clearly explain to their families as to how/why the various contributed $'s have been badly burnt after some share consolidation - just like all the other poor bastard shareholders. Sadly for someone like Lloyd Thompson (the biggest holder), who from my conversations with I consider a genuine good man, would dragged into the mire with the rest. Some of the directors seem to have dodged the buying of large volume script responsibilities therefore the public cohort are always at risk of getting badly burnt.