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Subject: For a given amount of profitwill be about a thirdof what it would have been.

Author: positive effects of being debt-free

[ Next Thread | Previous Thread | Next Message | Previous Message ] Date Posted: 19:23:37 01/10/03 Fri Post a new message ERG - ERG LIMITED Symbol Last Change $ % Open High Low Volume More Information Broker Edit ERG 0.105 +0.005 +5.000 0.105 0.110 0.100 1,572,747 Profile Chart Customise Broker Quotes delayed 20 minutes, Australian Market is currently closed (2:20:32 PM:AEDT) Posted by: Pessimist Dec 31 2002 11:19:36:530PM Reply to post #3480 by tony1000 Go to Post # Previous Respond Message List Next The market cap. increases because the $250 million debt disappears. The company is then worth $250 million more than it was. It's as simple as that. The dilution affects future earnings per share. For a given amount of profit, the cents per share dividend paid will be about a third of what it would have been. At present, there are no future earnings factored into the share price. In fact, the current price even appears to be below the value of the company's assets. But if things look up and the company starts earning profits, the shares will rise at only a third of the rate they otherwise would have, because of the dilution. So, yes, the market cap. definitely increaes, but it will take three times as much profit for the shares to rise to where they would have before the dilution. That's my simplistic take on it, without taking into account the positive effects of being debt-free, and the negative effects of the debt continuing to hang over the company if the restructure were not to proceed. (Voluntary Disclosure:Position Short Term rating: Long Term Rating:) OZeStock Advertisment:"Get yourself an institutional advantage!" Previous Respond Message List Next Bookmark Member Ignore Member Bookmark Board Terms Of Use Violation -------------------------------------------------------------------------------- Neither OZeStock nor the persons making the postings are licensed investment advisers. Therefore, before acting on the basis of what is said in a posting, you should either:(i) consider consulting a licensed adviser (ASIC's web site at www.asic.gov.au has a list of licensed advisers); or (ii) visit ASIC�s consumer website at www.watchdog.asic.gov.au for general guidance about investing. Persons making postings are individually responsible for the accuracy and authenticity of their postings. Because OZeStock and persons making postings are not licensed investment advisers, you will have no access to ASIC approved dispute resolution schemes to recover any losses you may suffer by relying on the postings. Securities cannot be offered to you for sale or subscription on this site. You should contact OZeStock or ASIC Infoline on 1300 300 630 if you suspect that any postings are inaccurate, based on inside information or likely to mislead and deceive viewers/users. [ Next Thread | Previous Thread | Next Message | Previous Message ]