Thursday, August 25, 2011 3:43:02 PM
Is it inherently bad when a company wishes to increase authorized shares?
Actually, no its not. Let me explain, first just because they issue additional authorized shares does not mean they can cash in so to speak.
In addition, my experience has been most times when a company wishes to increase authorized shares is to retain control of their company usually from hostile take overs. I will explain further, because I looked at etrade stock recently, they made a drop on opinions not facts, and their diminished price is pretty attractive for a company to offer $8 almost double, and what they are worried about is the shareholders would be willing for the $8 although the true value may be higher.
So in conculsion, they use the authorized shares as a protection measure from any change of control of ownership, in addition they can also use their authorized shares to acquire other companies rather than using their cash (of which they have in excess of 2 billion) they can use stock for stock transaction and actually increase wealth to the company of which increases wealth to your share.
So actually no it is not bad when a company increases authorized shares.
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