Over the years, I've seen shares do all kinds of things after consolidation, some have halved in value, some have doubled in value, some have maintained the status quo.
My thought is that a good quality company, with good management, positive cash flow, little or no debt, providing dividends, and a solid path to exploration and growth that is well mapped out and explained to the investment community, should be on reasonably good ground post consolidation.
We all have to weigh up our experience, and our view of the company and it's management, and do some risk/reward analysis - it's not an easy thing to do, for anyone.
The investment funds also usually go and talk with the company, and critically ask them the main "reason" for the consolidation, and if there is a really solid valid one, then it's usually looked upon somewhat favourably.
I've seen some small caps with billions of shares out, do a consolidation for the reason of capital raising, this is not usually looked upon favourably,, and especially not if the share price has been declining, some of those stocks halved in value for good reason.
It's a different kettle of fish for a stock with no debt, cash on the balance sheet, paying dividends, and growing profits year after year, and especially if they can inform the investment community that their reason for a consolidation is to simplify dividend payments from improving profits, or because a significant overseas fund who wants to invest has asked them to consolidate, or because they needed to in order to co-list on an overseas stock exchange due to increasing profits, etc.
Sometimes consolidations are not seen as generally beneficial, as per investment sentiment by a group of shareholders, and even good companies can take a short term hit, but in my experience it is usually short term and the price recovers within a reasonable time and then sometimes surges forward.
There are just so many factors involved, and it's complex sometimes.
The reason why I am optimistic for SXY, is for all the positive reasons I've stated above. They are going into the consolidation with a growth profile, no debt (after the sale of the Cooper basin assets), good management, and estimates of increased production out to 2025 which are quite significant in size, as well as the promise of dividends.
To me, the company seems to be in good shape, and I am hopeful, however I have seen the market do some crazy things over the years, so no-one really knows. I'm prepared to hang in here though, at least for the next year, get the first dividend, and see how the stock is traveling, and with a little bit of luck it could be doing fine. Here's hoping anyway.
Gw
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