Wednesday, December 19, 2007

A Split Too Far

Notorious serial splitter, the sanitized loan-sharking firm of Nissin Co. Ltd. (TSE code#8571) had a rather unusual problem on its hands - the unintended consequence of temporarily successful attempts to goose stock price performance by conducting large and frequent stock-splits described in these historical posts: The Joys of Serial Splitting; Nissin: Confetti Certs; Stock-Split Performance-Option Still Alive; 10 Divided by 1 Equals 3. Really!!. It eventually (rather unsurprisingly in Cassandra's opinion at least) resulted in a sub-YEN50 stock price. This was decidedly BAD for stock-price performance and core shareholder since many investors have floor-prices under which they are precluded from investing, and beyond which they must sell, as well as yielding a bid-offer spread in excess of 2%, further deterring investment appeal to punters.

But being passive is NOT something which the Sakioka's can readily be accused. In order to rectify the situation, management decided to radically change course, ordering a "reverse-split" that was imperative to preventing a wholesale slide to low-price ignominy. So on Aug 31, they conducted a 20-for-1 reverse split, undoing the wonders of the last three feats of serial splitting, in one, fell-swoop. Skullduggery apparently has its limits (and just consequences!). And it couldn't have happened to nicer guys! Cassandra's children certainly welcomed events since Dec 2005 (when short positions yielded little but angst, drawdown, and the prospect of a local education), but with shares now at 15 cents on the proverbial dollar prevailing then, school fees (and then some!) will once again manage to be paid. So I extend my hearty thanks to the Sakioka clan for their dedicated cooperation, and all those punters and professional investment management firms stupidly vying for performance options, who, in trying to get something for nothing, helped create parochial fortune out of others institutional abuse.

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