RE: Share consolidation2 May 2023 23:18
evening bignose.ive been tied up most of the day,but have now had a chance to give some thought to matters, but i'm afraid to say that in all honesty i have absolutely no idea what, if anything, is in mellon's contemplation for the future.i agree that in principle fewer shares in issue should lead to greater volatility through reduced liquidity and this was probably the reason behind the poor reception to the news(although i do think the name change fiasco won't have helped).however i am inclined to think that this may not have too much of an impact going forward bearing in mind the tiny value of shares normally traded.even when we get a bigger volume day and the price moves more than normal,the value traded is still minuscule in the context of a publicly traded main market company.i may have got this completely wrong of course,but im not sure that increased volatility is inevitable.
where i am completely with you is in being suspicious of the future intent as perhaps revealed by inspecting the entrails of the proposal. they expressly refer to the problem of being unable to issue new shares at a discount to the nominal value,hence the convoluted exercise to get the nominal down to 0.001 hkd. clearly they don't want to leave it at the post consolidation,but pre subdivision,value of 0.20 hkd,but to arrive at 0.001hkd hardly suggest confidence in future s/p performance.also as you say,does this presage some huge recapitalisation which will finally obliterate existing pis. your guess is as good as mine.of course they may simply have gone for what seems be an unnecessarily low nominal value just to generate the accounting credit of $45m approx (the difference between the nominal value of the existing issued capital and the value of the issued capital after capital reduction)but im no accountant and will have to leave it to others to evaluate this. feeling very much like a straw blowing in the wind here im afraid.