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Microcap & Penny Stocks : 1ST MIRACLE GROUP (MVEE), founders last co. went $0.20-$46
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To: Laura E. who wrote (5315)5/21/2000 9:49:00 PM
From: Walter Morton  Read Replies (1) of 5541
 
You have to do step 1. before you can do step 2. You have to buy back the shares before you can retire them.

After that the difference is merely where the stock shows up on the Balance Sheet. When a stock is bought back it goes on what is called the Treasury Stock line in the Balance Sheet. If you decide to retire the stock it comes off of the Treasury Stock line and goes back to the Common Stock line.

Whether MVEE buys back its stock and keeps it in treasury or retires it and puts it back into the authorized but unissued shares of common stock, you still get the same affect -- REDUCED CAPITALIZATION.

So, for example. If MVEE has 1.5 billion shares outstanding and the price is $.03 then MVEE has a market capitalization of $45 million. If MVEE makes enough money from its movies that it can buy back one billion shares at $.03 then there would only be 500 million shares outstanding and MVEE would only have a market capitalization of $15 million.

The good thing about this is that the lower the market cap, the less likely MVEE looks overvalued, and more likely that MVEE stock price will go up.

An investor my want to invest in MVEE today, but believe that MVEE is only worth about $45 million ($.03 per share). But after a buy back of one billion shares MVEE's market cap of just $15 million may seem to be undervalued by about $30 million. So, investors that think MVEE is worth $45 million will be willing to pay as much as 67% more for the stock than it is currently selling for.

A reverse split would not change the market capitalization of the company. 1.5 Billion shares X $.03 equals the same as 10 million shares X $4.50. That $4.50 would have to go up to $150 to equal $.03 going up to $1. That's not going to happen.

A buy back at these relatively low prices is the best thing that MVEE can do for its shareholders. I could live with a billion share buy back and a 1 for 2 reverse split. That would only cost MVEE about $30 million and they would get it back within days of the new release because the stock price would go up.

I also think buying back shares is better than endlessly issuing shares and reducing current shareholder value.

So, to answer your question. If MVEE buys back its stock and puts it into Treasury Stock, MVEE could still sell it later or use it for employee stock compensation. If MVEE retires the stock it just goes back into the authorized shared and can be issued later when ever Cataldo chooses to.
However, when MVEE does sell or issue its stock again it will be at a higher price and will generate more cash that it costed MVEE to buy them.

As long as MVEE does put shares back out on the market faster than MVEE is able to grow its company the stock price should remain stable unless MVEE is not profitable.

Futher, if MVEE is able to grow the company faster than they are able to issue stock and they make a profit, the stock price will go up.
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