Stated capital reduction

Can an expert explain this - its useful for a lot - pls let us know the after effects as well

you didn't know this was happening, all these days you were promoting this.

after effects - share price will reach 15-20

Capital reduction does nothing. - in theory.

Companies do this when they have huge carried forward loss bigger than their assets. In this situation, stated capital does not show real picture of the situation.
When there is no way to draw cash or profits in to reduce the losses they can reduce the capital in the books.

I said it does nothing because an equivalent amount of loss is written off in the other side when you reduce the capital. Hence final value of the company remains same. Number of issued shares remains same ( in BLUE)

Then why they do this ?
After erasing the bad image in the books they can march forward as a fresh company. Obtaining loans will be easier. Company reports look healthier.

Above is normal explanation about this.

In practice, I have observed the following behavior in CSE . I think it will be useful to you.

1. When they announce a Capital reduction people get it as a bad signal. They think something is going out from the company. Share price goes down in most of the cases.
2. Selling pressure increase and sometimes the MKT price reduced to 50%
3. Some people who know the subject study the future plans of the company and collect at bargain .
4. Later all the people realize nothing has happened in the company other than some tippex in both sides of the book.
5. Usually the managers do this with the plans of fresh takeoff . Hence they take take necessary action to boost the business.
6. Share price go up.

Please note this is from past observation. I do not know about the future of BLUE.

sanjaya351 wrote:Can an expert explain this - its useful for a lot - pls let us know the after effects as well

just promoting dats what this guy knows ................. no logic...what mad fellow

Chinwi wrote:Capital reduction does nothing. - in theory.

Companies do this when they have huge carried forward loss bigger than their assets. In this situation, stated capital does not show real picture of the situation.
When there is no way to draw cash or profits in to reduce the losses they can reduce the capital in the books.

I said it does nothing because an equivalent amount of loss is written off in the other side when you reduce the capital. Hence final value of the company remains same. Number of issued shares remains same ( in BLUE)

Then why they do this ?
After erasing the bad image in the books they can march forward as a fresh company. Obtaining loans will be easier. Company reports look healthier.

Above is normal explanation about this.

In practice, I have observed the following behavior in CSE . I think it will be useful to you.

1. When they announce a Capital reduction people get it as a bad signal. They think something is going out from the company. Share price goes down in most of the cases.
2. Selling pressure increase and sometimes the MKT price reduced to 50%
3. Some people who know the subject study the future plans of the company and collect at bargain .
4. Later all the people realize nothing has happened in the company other than some tippex in both sides of the book.
5. Usually the managers do this with the plans of fresh takeoff . Hence they take take necessary action to boost the business.
6. Share price go up.

Please note this is from past observation. I do not know about the future of BLUE.

Thank you chinwi a lot to explain this like an expert. I understood that very well.

Chinwi wrote:Capital reduction does nothing. - in theory.

Companies do this when they have huge carried forward loss bigger than their assets. In this situation, stated capital does not show real picture of the situation.
When there is no way to draw cash or profits in to reduce the losses they can reduce the capital in the books.

I said it does nothing because an equivalent amount of loss is written off in the other side when you reduce the capital. Hence final value of the company remains same. Number of issued shares remains same ( in BLUE)

Then why they do this ?
After erasing the bad image in the books they can march forward as a fresh company. Obtaining loans will be easier. Company reports look healthier.

Above is normal explanation about this.

In practice, I have observed the following behavior in CSE . I think it will be useful to you.

1. When they announce a Capital reduction people get it as a bad signal. They think something is going out from the company. Share price goes down in most of the cases.
2. Selling pressure increase and sometimes the MKT price reduced to 50%
3. Some people who know the subject study the future plans of the company and collect at bargain .
4. Later all the people realize nothing has happened in the company other than some tippex in both sides of the book.
5. Usually the managers do this with the plans of fresh takeoff . Hence they take take necessary action to boost the business.
6. Share price go up.

Please note this is from past observation. I do not know about the future of BLUE.

Thank you very much!

hmmm sounds true.... its just two entries on both sides...the loss is already there...people only realized now that the share is overvalued....its like this
you could have a portfolio of Rs 2.5Mn and have a account settlement balance of 1Mmor else whipe the settlement and have a 1.5Mn portfolio...
above is the same i guess...correct me if im wrong....