That's a good answer. I tend to be very verbose and don't pretend to have all the answers. I've got posts all over the place and sometimes people follow my posts for a good laugh or a great gust of wind.
Here is a post I put on the IHub INSQ board in response to a similar question about the meaning (from a practical standpoint) of these terms. The issues are common in many of these cheapie stocks so perhaps it is useful. The CEO of GSHF is moving shares around to create what looks like a pretty decent environmental conglomerate, but his moves are confusing. This creates both an opportunity and a risk as the structure becomes the key.
Disclaimer - as with all posts they are opinions, not legal opinions and terms can vary from jurisdiction to jurisdiction. Or I could be just plain wrong.
Here's my post
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The concepts used by CEO's particularly in this type of complex set of entitities can confuse us retail investors. That often is done on purpose and I find that having good information makes for better decisions, irrespective of whether the info is postive or negative.
Here's the way I look at how the definitions of capital structure affect the price of our shares. These are how I understand the market and are not intended to be legalistic or formalistic or accounting correct.
The FLOAT - my own definition being the shares that are basically available for trading each day - is the SUPPLY of shares. The other part of the Samuelson equation, which determines share price, is DEMAND and that is affected by the information we receive, on, e.g., message boards, PR's, filings, charts, etc. Float is free trading shares, not restricted. Shares held by insiders, even if not restricted, are often held in such a way that it can be reasonably said that those insiders are not selling or trading. In that case, their shares are not part of float. This is subjective though as sometimes greedy insiders will dump even if it foolishly tanks a stock. In this case, even though the GSHF shares are not now restricted, they can't from a practical standpoint sell them because nobody would buy them. The share price would approach 0 if they tried to sell them tomorrow. That's what I mean when I post that we have to take a reasoned approach to value and not get stuck on formal terms. Common sense prevails in determining a share price.
So the SUPPLY & DEMAND for shares is what directly affects the PPS and causes it to go up or down. The company could be worthless intrinsically or by some accounting or financial definition and still trade at a market cap in the 100's of millions. OTOH, I believe I own stock in many companies where the intrinsic value (and I may be the only one who knows the truth <GGGG>) is high but the share price is low!! So, I buy those shares and hope that others will come along and agree with me, causing my shares to go up in value. That's the name of the game.
So, I look at what Kreissler is doing in reducing the float as a good thing but not charity. I look at him as neither a saint nor a crook. He's not giving me something for nothing. To the extent that I can align my own interest with his, I feel I have a better chance of making money. He clearly is trying to get the value of shares in his entities higher. He is cutting float, he is PR'ing stuff that sounds good, he is moving around shares, all to create a perception that will make for a higher DEMAND for my shares.
SHARES OUTSTANDING - Note the PR's are saying that the COMMON shares, the market cap for the COMMON, are being reduced. This is good as the float (see above) is lessened. However, it does not mean that Kreissler has given us something for nothing. He basically is taking a bunch of shares and calling them something else and saying they won't be part of the float for quite awhile.
AUTHORIZED SHARES - this is a legal term that pretty much is meaningless with respect to the current share price. It just means that the company CAN, but doesn't have to issue these shares. I believe in Nevada and a couple of other states, this can be done without a shareholder meeting but in most states you have to have a shareholder meeting. From a practical standpoint, that is also trivial because in most microcaps, the insiders control the vote. Being authorized, does not mean they are or will be issued or that they will become part of the float, which determines current share price.
Bottom line is that, like everything in microcap investing, it is a combination of TRUST and making sure that the CEO knows that we are with him but, in return, he has to foster us, care for us, be truthful, and be, above-else SHAREHOLDER FRIENDLY. Financial dynamics and maneuvering to REDUCE THE FLOAT, is IMO a positive. It will buy him time to produce and follow a very complicated business plan.
He is sacrificing the immediate sale of cheapie and freebie shares by insiders, quasi-restricting the shares, and saying, he is with us and won't be selling until the business plan is further played out and the success he predicts is closer to fruition. From a pracitical standpoint, he couldn't sell the shares anyway, so why not make them "preferreds" and put them away for that day when the share price is a multi, multi bagger from here.
In all honesty, I cover so many stocks that I can't tell if a Tornado generator is something that will create millions in revenues, but I do have common sense and can read that a CEO is putting his shares on hold for awhile such that the big payday coincides with his shareholders. So many of the companies that I follow say they are doing that, but then, low and behold, they dilute and dump. So I am trusting, but wary, if that makes sense. |
