Kentor Gold announced the details of their AGM yesterday, along with a resolution to consolidate the number of shares on offer by a ratio of 10:1.
Obviously, this has no effect on the company’s value because if you had 10 shares worth 10 cents each (total $1), they just become one share worth $1, but I don’t know why so many companies proceed down this path. In my experience it results in some short term pain as the share is dropped by short term holders and traders. It then takes time for longer term investors or funds to pick up the slack.
I can only hope that news on Andash and Burnakura comes out well before the consolidation, which is scheduled to take place on 10 February 2012. The reason why I would prefer no consolidation, or at the very least consolidation after a major news items, is because the share price has the potential to run a lot hard (in the short term) when it is priced in the cents, rather than dollars. (i.e. selfish reasons associated with wanting to see the value of my holds increase as much as possible on each announcement)
Long term it will matter little and we need to trust that management know what they are doing. I can also see the benefits of consolidation, with the main one being that investment funds and institutional investors may be more inclined to purchase stock. I do however wonder if it is to position to the company for future acquisitions? The reason why I ask this is because Kentor Gold have recently stated that their aim is to identify, acquire and develop advanced stage projects.
Feel free to let me know your thoughts on this issue and if you have recently experienced a share consolidation plan with any of your holdings.
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