Let's look at some aspects of share consolidation.
Why bother? One reason arguably is that, in the eyes of some company chairmen, CEOs and finance directors at least, the level of your share price is a corporate virility symbol and naturally, the bigger the better.
With a share consolidation, however, the drawbacks of small-scale share prices are removed, the main one being the high percentage bid-offer spread on 'penny shares'.
Consolidation is also viewed to some degree as a way of shrinking the number of shareholders to a more manageable size, as some smaller shareholders, with just a few shares after a consolidation takes place, might see little point in hanging on.
Imo a share consolidation does not change the underlying fundamentals of the company's business. It's also doubtful whether it would reduce the volatility of the shares, as it may appear to be. Once the consolidation has taken place, Mpj's shares will be, on the basis of its current price, around 0.06 instead of the current 0.006 and it would have to be considered that the then conversion price should be at ten times the price at which the shares previously traded.
Shareholders should expect some volatility on this proposed consolidation.
So anything can happen after a share consolidation - good, bad or indifferent. What matters above all is not how many shares are outstanding, or what level the share price stands at, but how well the underlying business is being managed, and how much cash is being generated.
The selling pressure maybe applied by some as their choices are based on "just that" but there isn't a surety that it will happen. The success of this stock is dependent IMHO upon what those "pegmatites" hold and if they show promising results then the SP will surge north and will attract more quality investors.
Expand
