Replies to post #54294 on SunWorks Inc (SUNWQ)

[SandridgeEnergy]

A growing company can be a bad investment. To show how this can be true take a look at this image I put together a while back:



While the company size as measured by market capitalization grew rapidly in the course of a year, because of dilution ordinary shareholders like you actually lost money.

To bring us up to speed since July...

Market cap is now 52M and share price is 2.63, both lower, but let's measure the differences in percentage change to see the pernicious effects of dilution in action.

Market cap went from 60M in July to 52M today.

% change = ((x2 - x1) / x1) * 100

Where X1 = the base value (60M) and X2 = the current value (52M)

-> ((60M - 52M) / 60M)) * 100 -> (8M / 60M) * 100-> .13333 * 100 -> 13%

So there was a 13% decrease in market cap.

Doing the same thing share price where x1 = 3.37 and x2 = 2.63 gets a decrease of 22%.

So market cap has gone down 13% while the share price has decreased 22%.

That is how a growing company can lose shareholders money when dilutionary events are commonplace.