Sunday, 8 February 2015

Dilution is very real

GMO published its quarterly letter, which is always interesting to read.

Regarding the issue of dilution (also in relation with my previous posting), GMO wrote the following regarding the relationship between GDP growth and EPS growth for a nation:

I am sure the above holds true for many Bursa listed companies as well.

Some will boast about their increase in market cap, while a lot of that was funded by rights issues, private placements and acquisitions paid for by issuing new shares while hardly paying any dividends.

Next to that there will be rather quiet (one could say: boring) companies, where market cap has grown less spectacular, but where no new shares were issued while paying out generous dividends.

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