WangChung, the amount of shares on issue affects the dividing of profits and hence the P/E ratio which then influences the share price.
BRM has 144million shares on offer. Assuming that the 17million tonnes per annum leave a net profit of 288million dollars to be distributed to each share ie $2 per share. If there is a P/E of 10 used, the market would value the share as $20. If you double the number of shares, the profit distribution would then leave the share value as $10. Similarly, if you consolidate the 144 million shares to 72 million, it will value the share at $40.
The individual shareholders share of the profits isn't affected as it is the same body of shares being split 2 for 1 or consolidated 2 for 1.
In WNI's case, they initially offered 3.8 billion shares to receive the $288million net Brockman profit. They've now issued an additional 25% shares to receive the $288 million (not splitting the original shares with a 1 for 4 issue), which means more shareholders with which to share the wealth. That means the lower profit per share affects the overall share value.
Dilution is important not only because of the share of profit you receive but its impact on the share price.
I hope I've been able to explain the difference between share splitting and dilution through the distribution of additional shares. If not, sorry, it's the best I can do.
- whish i However, if the same core shares are being added, because it's ore of shares
WNI Price at posting:
19.5¢ Sentiment: None Disclosure: Not Held
