A larger amount of shares does not increase liquidity. Liquidity...

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SLewis

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05/08/20

18:33

Post #: 46328286
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Originally posted by AdVictoriam: ↑

Generally speaking, with a larger amount of shares, volatility decreases due increased liquidity.

Notwithstanding that, my point was regarding a second phenomena; being future price targets for CAJ. The main factor in SP is EPS, which is a function of the total issued shares. Therefore, for a given earnings amount, a larger share issue means a lower SP. This effectively lowers future SP targets.

It affects holders especially who've held through multiple dilutions. Eg hypothetically someone buys CAJ at 20c two years a go, then there's multiple dilutions, then due to earnings increases the SP rises to 30c. Without the dilutions, the SP would be somewhere above 30c, bringing higher gains to investors.

Whatever future SP targets one has in mind for CAJ, it is affected largely by EPS.

Check out KGN or GSM, you won't see those moves in stocks with a bloated no. of shares. Both have a low no. of shares.

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A larger amount of shares does not increase liquidity. Liquidity refers to the ease with which an asset, or security, can be converted into ready cash without affecting its market price. If I hold $50,000 worth of CAJ shares, liquidity has to do with the ease at which I can convert that holding into cash. More shares outstanding has no impact on the execution of the trade, it just relies on a ready buyer for at least $50,000 worth of CAJ shares. Makes no difference if we exchange 100 shares or 10,000 shares.

In regards to your other points, yes I agree 100%. As tamz mentions though, if they have readily available investment opportunities that have a higher rate of return than their cost of capital it will, in due course, have a positive impact on EPS.

CAJ Price at posting: 21.0¢ Sentiment: Hold Disclosure: Held
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0 Great analysis

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