HSX Forum

Playing & Trading Strategy

not really

Posted by: alfpaulytd2012 on May 30, 13:14 in response to ndmaster's post yeah, but what's interesting is this:

EPS (earnings per share) is pretty much the main fundamental used to value a stock. However you use it (trailing, m2m, q2q, et all), EPS and EBITDA are what most common valuations are based on.

And increasing the number of shares decreases EPS, which leads to lower perceived value (DILUTION), which leads to selling, which leads to buyers taking advantage of that fact and wanting discounts, which leads to markets matching buyers and sellers at lower prices.

Impact not direct, but its there.

Companies try to hide it with announcements of new markets, new products, dividends, etc, but really the value of a share is diluted and they'd be trying to cushing the psychological impact.





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