Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: aldrums who wrote (8482)	5/17/2000 4:07:00 PM
From: OZ	Read Replies (1) \| Respond to of 18137

Then this must mean that even if a company has a large amount of outstanding shares they are not worth anything unless purchased because they do in no way represent the real value of the company. Is that correct? Not quite. The terms you need to separate in your mind are AUTHORIZED and OUTSTANDING. If you insert the word authorized in place of outstanding in you paragraph above, then it is correct. A companies charter authorizes and limits what amount of shares can be sold. That does not mean that they can even come close to that amount though. The underwriter and whatever syndicate formed have to determine what can be sold and for how much. The level of compensation they receive is set depending on what level of risk they want to take. This varies from "Firm Commitment" to "Best Efforts" to "Mini-Max" and various other degrees. Under firm commitment (to keep it simple). All the entities involved must buy a pro-rated amount of whatever amount shares that did not get sold to the public. This is risky. Therefore it is in everyones best interest to properly determine the amount of public interest in the offering. The shares that are sold are what become the "outstanding" shares. If a company keeps issuing shares (up to the authorized level) and people keep buying them, then it is obviously not a worthless company. can a company increase or decrease the volatility of its stock and increase or decrease the liquidity of its stock by issuing more shares or by buying shares back? Absolutely regards, OZ