The announcement of 25-into-1 share consolidation on 30 June 2010 doesn't bode well for abterra shareholders as there seems to be an ulterior motive behind this corporate move. Where else can you find a stock with a market capitalization of around $250m to have a share price that is around $1.25 on Singapore Stock Exchange?
Therefore, I expect a big fund raising exercise in any way in the foreseeable future as the only logical rationale for the reverse stock split. Current shareholders will suffer from major share dilutions if there is indeed a fund raising movement if they are holding on the stock.
The explanation given by abterra was just a classical textbook excuse and should be disregarded as the stock will have more downside after stock consolidation as it seriously affects or twists the risk perception since it has more room to fall when it is above $1.
Abterra should just focus on its core competencies and not get involved in the capital market. There is no better way to prop up the stock price than to improve on its profit. By making the stock above $1 through stock consolidation will not attract fund managers to take notice of this stock but instead will attract speculators to play it.
When the management starts to alter the share price, it shows that they can't improve on its business anymore and try to work on other means.
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