Wednesday, December 13, 2006 11:27:24 PM
Let's say a company has $1 eps, 10,000 shares of stock and trades at a p/e of 10....stock price $10. Therefore the market cap of the company is $100,000. If the company decides to dilute the stock...maybe even by calling it a dividend, then there will be 11,000 shares of stock....since earnings haven't changed in real terms....eps drops to $0.909 recurring...and at a p/e of 10, the stock price drops to $9.09 recurring and the market cap stays the same at $100,000.
A company that doesn't have earning or internal logic to it's stock price....doesn't work like this...but the principle remains the same.
These guys think that if we have more shares we're happier....as if more shares means more value and money...LOL! They think their shareholders are idiots....
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