Forum Archive Index - August 2001

["Ben Dutton" <bendutton@sharechat.co.nz>]

Hi John,

Just thought I'd tap out a quick answer to your statement:

"Also I still fail to see how splitting can improve liquidity"

New Zealand retail investors have traditionally had a fear of buying
"pricey" shares - anything over $10 is seen as "expensive" (the logic is of
course flawed).

To increase liquidity in a share (liquidity = a large number of buyers and
sellers) a company must increase its shareholder base (illiquid shares tend
to be companies with a few large shareholders that own most of the stock).

So, the situation with Sky City at the moment is that some NZ investors
regard the company as being "expensive" (even though its not as such) and
thus may not buy the shares.  If a share split was to occurr the company may
become more attractive to smaller investors because of the lower price, and
therefore the shareholder base may increase with a resulting increase in
liquidity.

Best Regards

Ben Dutton


----- Original Message -----
From: John & Robyn Armstrong
To: sharechat@sharechat.co.nz
Sent: Wednesday, August 22, 2001 7:52 AM
Subject: Re: [sharechat] SKC- Another good result!


Thanks John W. My mistake, meant 3:1.

However the principle remains. By cutting an apple into 3 we still have the
same amount of apple (less the costs of cutting it).

There may be powerful reasons for splitting but none are based upon
mathematics.

Also I still fail to see how splitting can improve liquidity and for that
matter how can it make a take-over by another company expensive?

If you carry the logic to near the extreme then they should have a 100:1
split.

regards

John


----------------------------------------------------------------------------
http://www.sharechat.co.nz/          New Zealand's home for market investors
----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/forum.shtml.