Good morning Joan,
Incidentally, one the hottest topics of discussion on the SWS thread is whether SWS should sell off its NITE shares, and if so, when. What would you advise? SWS itself announced today (Friday) that it would in fact be selling some of its NITE holdings, on an "as needed" basis, to fund a 40-million-dollar expansion of its on-line business.
I don't know if you understand the meaning of a secondary offering, so at the risk of being pedantic let me start by defining it. It is the sale of restricted stock -- that is, stock that the owners were precluded from selling for a certain period of time or under certain circumstances. My understanding is that considerable restricted stock is currently held by a number of brokerages; the sale of that stock would constitute the secondary offering to which I referred.
The "value" of many of the internet stocks seems to rely on the low float. In all probability the price of NITE will suffer, and SWS with it if there were a secondary offering. Were I SWS I would probably dump NITE to take advantage of the high price now, because it may not persist through the secondary.
And would this second announcement,also made today, change your assessment of the possible impact on SWS of a NITE secondary offering?
DALLAS, May 7 (Reuters) - Financial services company Southwest Securities Group Inc. on Friday said its board has declared a 10 percent stock dividend.
This is not a dividend at all, but a stock split. It does not create value, nor does it put cash in the hands of shareholders. The following simple example should illustrate this. Suppose the company were worth $100MM before the "stock dividend". Its value ought to be worth $100 MM after because the business has not changed -- only the number of pieces of paper. So you could expect the price of the stock to drop by around 9.1% to compensate for the additional shares. In other words there is no change.
In any event, it has no connection with the secondary offering.
TTFN,
CTC |
