If that *portion* of the company was worth £1,000 on Monday pre-scrip how can it be worth anything other than £1,000 on Wednesday post-scrip.
Say that portion is 1/4 of the company - 1,000 or the 4,000 shares. The company is worth £4,000 on Monday. On Tuesday there is a 1 per thousand Scrip Issue. Scrip shares are issued equally to all shareholders. The 1,001 shares represents 1/4 of the company - 1,001 or the 4,004 shares. The company's value hasn't changed and nor has the shareholding.
That was my "self-deprecating joke" - or didn't you read the end of my post... :-(
Thank you.
, prices of freely-traded shares in quoted companies tend to reflect
Yes - and so it is all cases
Absolutely not. There are many considerations, whether privately traded or otherwise, which do not show up in Coy report and a/c's
A truism tends to be true...
To make it easier to understand the argument which I then set out.
OK - YMMV. But AFAIAA the problem didn't say anything about intervening scrip issues, divs etc, nor about the div record date for such. Think of foward trading - if I agree to buy Google shares from you in 12 months time, I do not expect you to hand me any divs or scrips in the meantime, unless we've agreed that. (A share split would be different, since par value would change.)
Seller (bloke two) clearly wasn't, but bloke one may have been. The interesting thing, of course, is that bloke two could have known if only he had read the invitation to the GM at which the ordinary resolution has to have been tabled and passed.
which is what I said.
Evidently - a different question often yields a different answer... even in Troy's world.
Thank you,
Thank you.
Thank you.
Granted
I don't think you've read what I wrote carefully enough......
"1,000 worth of that 1,001 worth of share certs" describes a quantity of share certs. But rather than call them 1,000 shares, I'm emphasising that the original 1,000 shares had a value on Monday of 1,001 / 1,000 each. By Wednesay, their value was 1,001/1,001 each. So 1,000 shares were worth
1,000 on Wednesday, exactly matching the amount bloke one pays for them.
To be legal, it would have been notified to all members
That's a big "if" - and still not a given if Monday's "contract" (as you see it) was silent on the issue of accompanying rights.
I hope we can agree that it was a badly written question and our mutual friend should stick to his day job. Or on reflection, perhaps it is his day job... :-)
You can't. It was *already* more valuable from accumulated profits. It can then either give some of the profits away as a dividend, making it less valuable, or as an extra share, keeping the value unchanged.
Actually the company (or portion) *was* worth £1001 on Monday and is therefore still worth £1001 on Wednesday. If instead of issuing a scrip on Tuesday, the company had paid a £1 dividend out of its assets, then the company would be worth only £1000 on Wednesday, but the shareholder would still have £1001 worth of value, namely £1000 worth of shares plus the dividend pound in his pocket.
Despite being worth £1001, the shares changed hands for £1000 because that was what the parties agreed, presumably because they *thought* it's what they were worth. The extra share (or what could have been a dividend) was an unexpected bonus either for the buyer (if he got it by virtue of being beneficial owner on Tuesday) or for the seller (in all other circumstances).
The company started off being worth £1000 by issuing 1000 shares which our canny investor buys. The company spends £999 on buying a widget making machine and £1 on raw materials. It then turns the materials into widgets and sells them for £2. Now the company is worth £1001, but has only £2 cash, the rest being tied up in the machine.
It could give £1 to the investor as a divi, and use the other £1 to buy more raw materials, to sell for another £2. However, the highly motivated manager has just heard of this concept of exponential growth, and persuades the directors to hold back from issuing a dividend, so that they can buy £2 of raw materials to be sold as £4 worth of widgets. The board therefore pulls a fast one on the shareholder and issues another share instead of a divi. It's like getting a free bank loan.
"Had the seller had his brain cell switched on, he should have asked for £1001, but as it is, it's his loss, and the buyer ends up with 1001 shares worth £1001, which he acquired at the knock down bargain price of £1000."
While it's may be pats on the back all round for the vaguely mumbled stuff - "My hearing aid is playing up" etc - that stark sentence is unambiguous.
"Had the seller had his brain cell switched on, he should have asked for 1001, but as it is, it's his loss, and the buyer ends up with 1001 shares worth 1001, which he acquired at the knock down bargain price of 1000."
While it's may be pats on the back all round for the vaguely mumbled stuff - "My hearing aid is playing up" etc - that stark sentence is unambiguous.
"1001 shares worth 1001"
Is it:
(A) Right?
Or
(B) Wrong?
#############
Please can you tweak your 'puter so it inserts some >>>> things when I hit reply...?
Answer (A) Right.
The issue is who owns the odd one. I say bloke two (seller),
Football? It's not Saturday already, is it...? Who's supposed to playing?
(play) school.
Correct - but I said that in relation to your original scenario. By all means have "multiple choice" (what a strange term - what choice isn't multiple, except maybe Hobson's? ...but I digress) but it you want a serious response, don't try to cut and paste my answer from one question to an entriely different question....
Only {1} twelve? [2] Certainly [3] - because [4] you've [5] muddled [6] up [7] different [8] answers [9] to [10] different [11] questions [12]
I think you'll find that if you re-read earlier posts in the thread _carefully_ you'll recognise where you've gone wrong in your thinking about this problem. Your mate RR understands it.
As a hint - don't confuse the price "bloke one" offered on Monday with the true value of the shares (and hence the company) at that time.
"Multiple choice" was a starting point for the "dumbing down" process. It became common in the US Education System in the late 60's, because the early computers were able to process hundreds of exam sheets in minutes, instead of the inconvenience of having to struggle through a student's bad handwriting.
There's no word (that I know of) to describe its opposite, but real questions used to be like this:
PROPER QUESTION Describe in 500 words or more why taking a well known and existing IT company like ES Ltd and pretending it is a newly incorporated "widget maker" for the purposes of spreading confusion and panic throughout uk.finance, is irresponsible. Your answer should suggest alternative strategies for viewing simple, illustrative models, that don't involve flights of fancy and a visit to the land they call Cloud Cuckoo.
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