There's a UK company I know of that are consolidating their shares by a factor of 50.
The share price is currently around 15p and at the end of the month the consolidation will take place.
From an investor's point of view what risks and opportunities can arise from this? Here are a few I am thinking about right now..
Obviously they want to keep it fair, however my thinking mostly revolves around the amount of shares held, (aka the multiplier) if you believe a company to in the long term will go up you want as many multipliers as possible and at what price is it buy those multipliers.
My feeling is 15p would buy you more shares now, but if the price is to be set at 50p it would only be cost effective if the price now was below 10p. Because for 1 new share right now you'd pay 75p total, 5 x 15p and after consolidation 50p. So it seems now would not be a good time to buy more, does this logic make sense. So what might have been an pro could be con.
I have also heard rumours that previous other consolations from other companies have ended in share price drops to start with. So if that were to happen it would be worth waiting. So a con to buy no if the price could drop later.
What can you see? Please keep answers simple.