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Technology Stocks : Advanced Micro Devices - Moderated (AMD) -- Ignore unavailable to you. Want to Upgrade?

To: seti who wrote (228159)	3/16/2007 12:00:24 AM
From: muzosi	Read Replies (2) \| Respond to of 275872

For normal companies that make money, all else being equal, doubling the number of shares halves the EPS, and thus halves the stock price. true but irrelevant as not all else is equal here. you're talking about a 2:1 split where the corp doesn't get anything in return for the extra shares. the case here is sale of shares which if can be done at $14 would double the assets of the company so theoretically there should be no effect on the share price. i think this shows the folly in using eps as the single parameter to decide the stock value. but as you say this sale may increase the probability of survival for amd which may have a positive effect on the stock price if one could trust amd not to squander the extra cash which is in doubt right now. another way to look at would be to compare book value vs stock price. amd fetches a book value of $10.57 per share according to yahoo which puts it at $5.87B. If this sales increases the assets by $7.77B the book value ps goes to 12.28. If the same ratio (ie stock price/book value ps) applies, one might expect the stock price to rise to $16.27.