Stock Market craziness
December 21, 2010 6:30 AM Subscribe
StockmarketNOOBfilter. A company issues direct shares of common stock to institutional investors at 20% below previous day price - good or bad for the investor who already owns that stock?
posted by (Arsenio) Hall and (Warren) Oates to Work & Money (28 answers total) 2 users marked this as a favorite
I'm not very savvy with the stock market (obviously), but I've got about 10-15% of my Roth IRA tied up in stocks that I research and buy on my own. I research a bit, listen to advice from more savvy friends, and take into account economic trends and so forth. I've been pretty successful, all things considered, but the one investment where I got really burned was this company whose stock would go up, they would issue shares at a reduced price (driving the share price down), the stock would climb back up, they would issue more shares, stock would climb, then they'd spike it again (repeat about 5 times) until the stock was trading at about 25% of what I put in, so I backed out. Currently I'm holding a stock I really like, and it's performed fantastically for me in the last four months or so I've held it, but they just issued (this morning) over 3,000,000 new shares at 20% below current market price. On the one hand, I can see this as a good thing, as the company will have more working capital and can continue to grow. On the other hand, I just lost 20% of that stock's value overnight. Plus, I'm really skittish now when a company does this and am wondering if I should just jump ship now. Is this a trend I should be wary of, or is this really more company specific and it's not conclusive either way?