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Simcountry is an Online Digital World where you are the President of a country.
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Shares (Little Upsilon)

Simcountry: Simcountry Bulletin Board  Shares (Little Upsilon)

Henry David Thoreau (Fearless Blue)

Friday, July 25, 2008 - 08:46 am Click here to edit this post
The investment funds do consider PEs in their trading decisions. As Avins says, the PE ratio is unaffected by splits.

As in real life, splits make the SC share market somewhat more complicated. Unlike in RL, there is no benefit to anyone for a split, only aggravation.

The main reason a real corp executes share splits is to keep a rising share price within a reasonable range. Stocks are normally (most easily and cheaply) traded in 100 share lots; high share prices can price potential buyers out of the market. When a split is announced it is an event that carries information. People see it as a sign that the company is confident that the share price will not drop back to lower levels. Hence sometimes a bump in the market cap of the company. A greater number of tradable shares, at a lower price, tends to make the market more liquid. None of this applies to the SC market. There are no market makers, no 100 share lots, no excitement or psychological drama surrounding a split, and the liquidity angle is laughable.

For those who want to use the share markets it would be much easier if the number of shares stayed at the initial 100 million. Then the share price would always easily and directly indicate the market value of the company. All of the quantity trading limits that are based on the market value would be standard, instead of varying as they are now based on how many shares are extant. So, fewer screens to look at and less math to run through.

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