Bought deals

BennyC

Junior member
27 0
If a company sells new shares at a price lower than the current price then the stock price will naturally go lower. What I don't understand is so long as the new shares are sold then eventually the lower prices will eventually go back to their original price so long as market conditions hsving changed. And it therefore offers a buying opportunity at its new price?
 
M

member275544

0 0
If a company sells new shares at a price lower than the current price then the stock price will naturally go lower. What I don't understand is so long as the new shares are sold then eventually the lower prices will eventually go back to their original price so long as market conditions hsving changed. And it therefore offers a buying opportunity at its new price?
Benny, this would depend on how the shares were issued, to determine whether the value might be affected. example, a company sells me shares at a discount, because im a loyal employee however the value of everyone else's shares hasn't necessarily been affected as the consideration for those shares would have been borne by the company. the company hasn't "diluted" the share capital
a rights issue again is another non-dilutive way to raise capital.
a convertible bond on the other hand can dilute the capital as well as I believe an issue of shares as dividend..so you always see the price go down at dividend issue
so I don't think they will naturally go down..all depends on the circumstance..
anyway, apologies for the pedantry

as for the dividend scenario, you might think that the new lower value will offer a buying opportunity but its no way certain. sometimes they do, sometimes also they don't. I looked into any sort of pattern but it was by no means certain. I can dig out a couple of scenarios, which was some time ago now

typically the value rises closer to ex dividend date, as anything after that date you are no longer part of any dividend payout and drops afterwards due to the dilution and also as there is no longer a desire to hold a share which may or may not pay out next dividend payment

hope this makes sense, and is the best explanation I can give..i'll look for those two scenarios as all market conditions were the same, one stock they rose immediately afterwards and the other died a slow death...and like i say this happened quite regularly
 

BennyC

Junior member
27 0
Benny, this would depend on how the shares were issued, to determine whether the value might be affected. example, a company sells me shares at a discount, because im a loyal employee however the value of everyone else's shares hasn't necessarily been affected as the consideration for those shares would have been borne by the company. the company hasn't "diluted" the share capital
a rights issue again is another non-dilutive way to raise capital.
a convertible bond on the other hand can dilute the capital as well as I believe an issue of shares as dividend..so you always see the price go down at dividend issue
so I don't think they will naturally go down..all depends on the circumstance..
anyway, apologies for the pedantry

as for the dividend scenario, you might think that the new lower value will offer a buying opportunity but its no way certain. sometimes they do, sometimes also they don't. I looked into any sort of pattern but it was by no means certain. I can dig out a couple of scenarios, which was some time ago now

typically the value rises closer to ex dividend date, as anything after that date you are no longer part of any dividend payout and drops afterwards due to the dilution and also as there is no longer a desire to hold a share which may or may not pay out next dividend payment

hope this makes sense, and is the best explanation I can give..i'll look for those two scenarios as all market conditions were the same, one stock they rose immediately afterwards and the other died a slow death...and like i say this happened quite regularly
The reason I ask is Kinross Gold shot down over 5% yesterday after they sold a bunch of new shares for $3 down from a stock price of $3.18. I'm in the stock so am obviously not very happy and want to exit my position. At the same time though I am wondering if I should buy up more shares if the price will rise back up and I'd make back the lost 5% plus more from my new shares. Alternatively though if the stock will remain down for a few weeks i will withdraw until the shares are sold then re enter my position and hope for a rise.

Any insight would be very helpful as I am new to buying actual stocks so am clueless as to what is going on???!!
 
M

member275544

0 0
The reason I ask is Kinross Gold shot down over 5% yesterday after they sold a bunch of new shares for $3 down from a stock price of $3.18. I'm in the stock so am obviously not very happy and want to exit my position. At the same time though I am wondering if I should buy up more shares if the price will rise back up and I'd make back the lost 5% plus more from my new shares. Alternatively though if the stock will remain down for a few weeks i will withdraw until the shares are sold then re enter my position and hope for a rise.

Any insight would be very helpful as I am new to buying actual stocks so am clueless as to what is going on???!!
http://www.trade2win.com/boards/stocks/213804-what-does-mean-kinross-massive-buying-potential.html#post2711858

this is my opinion. i wouldn't have bought yet as its early, id wait for a retracement and then if it went higher, i'd look at buying ( or buying more)
 
M

member275544

0 0
Why is that?
im not sure what you're asking why to..
its early, as a new trend hasn't been established yet. a retracement and then break higher would suggest higher highs higher lows..equals potential new uptrend starting. hope that helps
 

BennyC

Junior member
27 0
I guess what I don't understand is why the stock has dropped? Okay they sold some shares at $3 but so what? That doesn't change the value of the whole company so why has the price gone down? If it is due to fear that the shares won't be sold then that's huge buying potential. Or is it because the company has been damaged by selling stock too low so the $3 price is justified??
 
M

member275544

0 0
I guess what I don't understand is why the stock has dropped? Okay they sold some shares at $3 but so what? That doesn't change the value of the whole company so why has the price gone down? If it is due to fear that the shares won't be sold then that's huge buying potential. Or is it because the company has been damaged by selling stock too low so the $3 price is justified??
the stock has dropped because more people are selling than buying
it doesn't matter why. I say it doesn't matter because who on earth could really know why? nobody other than those who actually owned the stock..you'll never get to know that and no "expert" is also going to know. they give their tuppence worth of opinions because they are "experts" and its their job to give an opinion nothing more

your job is not to listen to "experts" because you or i are more of an expert than they might be and you or i actually have a vested interest (or you do anyway..they don't)
dont look for reasons why..just look for clues as to what is happening with the price and look for a new trend beginning.
 

BennyC

Junior member
27 0
the stock has dropped because more people are selling than buying
it doesn't matter why. I say it doesn't matter because who on earth could really know why? nobody other than those who actually owned the stock..you'll never get to know that and no "expert" is also going to know. they give their tuppence worth of opinions because they are "experts" and its their job to give an opinion nothing more

your job is not to listen to "experts" because you or i are more of an expert than they might be and you or i actually have a vested interest (or you do anyway..they don't)
dont look for reasons why..just look for clues as to what is happening with the price and look for a new trend beginning.
Thank you for your help Malagutu. The conclusion I draw from this (please correct me if I am wrong) is that if a broker outside of this deal wanted to sell to an investor they aren't going to be able to as there is now this other broker in the deal who is selling at 3 dollars. Therefore they have to sell at a lower price. So it won't be until the new shares run out that the price can rise again. I am therefore going to increase my position.
 
M

member275544

0 0
Thank you for your help Malagutu. The conclusion I draw from this (please correct me if I am wrong) is that if a broker outside of this deal wanted to sell to an investor they aren't going to be able to as there is now this other broker in the deal who is selling at 3 dollars. Therefore they have to sell at a lower price. So it won't be until the new shares run out that the price can rise again. I am therefore going to increase my position.
thats an odd conclusion..
at the moment an investor who holds stock can only sell at the current price. if new buyers (volume enough to support the drop) come in and raise prices, an investor would sell at a higher price.
nothing says you should buy more, as you don't know whats going to happen which seems to be the recurring issue. you are trying to infer something which may or may not come to fruition. wait for it to happen ie confirmation of a new trend starting
don't rely on assumption of brokers or the actions of investors. they will tell you, and it will appear in the form of rising highs. wait for that to happen. thats the only conclusion you should be drawing from what ive said, nothing else
 

barjon

Legendary member
10,557 1,709
Company has 1000 shares standing at £5 therefore cap = £5000
Issues 500 new shares for £4 = £2000

Total issued shares 1500 and cap = £7000
Therefore each share is now "worth" £7000/1500 = £4.66
 

BennyC

Junior member
27 0
Company has 1000 shares standing at £5 therefore cap = £5000
Issues 500 new shares for £4 = £2000

Total issued shares 1500 and cap = £7000
Therefore each share is now "worth" £7000/1500 = £4.66
Company A is valued at £2000. 50 percent of the company (1000 shares) are therefore worth £1000 and shares are £1 each. The company issues another 200 shares at £.50 each so each share is worth (£1100/1200) £.91. But the company is still worth £2000 so in time the share prices will return to £1. Or am I wrong and the company has created the 200 new shares out of thin air?
 

barjon

Legendary member
10,557 1,709
Company A is valued at £2000. 50 percent of the company (1000 shares) are therefore worth £1000 and shares are £1 each. The company issues another 200 shares at £.50 each so each share is worth (£1100/1200) £.91. But the company is still worth £2000 so in time the share prices will return to £1. Or am I wrong and the company has created the 200 new shares out of thin air?
What do you mean "the company is valued at £2000". Who says so. The price of the shares is not governed by some internal valuation, but by the price people are prepared to pay for them.

In general, if the company put the proceeds from the share sale to good use - and thus increase the company's profitability and earnings - then demand for the company's shares will reflect that likelihood.
 

dbphoenix

Legendary member
6,952 1,250
Bump. I really need an answer so I can decide whether to sell or hold when the nyse opens
The value of a stock and the value of a company are two different things. That become clear 15 years ago. If you're confused and don't know what to do from this point forward, close out your trade and review your options. Nothing is preventing you from buying back in if that's what you decide to do.

Db
 
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