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In the answer to part b regarding dark pools trading,the bpp answer says
Dark pools are unlikely to impact on the subsidiary company of Kilenc bcz the share price of the sub would be based on the parent company which would not be affected by the Lanosia stock market.Why is it so?
Is it really that the share price of a sub is based on the parent co’s price?It is certainly not a rule, but in this particular situation (when effectively Kilenz is in control of the operation) it is likely to be the case.
Sir i don’t understand the last para of this part b answer, does it mean that when a parent co is effectively controlling a subsi the subsi’s share price would be affected only by the parent co’s share price?
And the sentence mkt efficiency in general in Lanosia would probably be much more important, is it because to ensure the ipo in lanosia is priced correctly?
This two sentence in last para seems to be contradicting each other to me.
The examiner has not worded that last bit very well.
What he is meaning is that the share price of the subsidiary should be based mainly on the share price of Kilenc (whether shares in general in Lanosia are doing well or doing badly). However, how exactly it is based on Kilencs share price will depend on how efficiently the stock market there is operating.
Oh i see, does this mean that if lanosia’s mkt efficiency is weak then the subsi’s share price will be based more on kilenc’s share price or..?
And dark pool is said to reduce mkt liquidity, is this mkt liquidity refering to due to less trading in normal stock exchanges the shares in the normal stock exchange is less liquid?
For your first sentence it is the other way round – if the market is efficient then it should be based more on Kilencs price (but if it is not efficient then maybe it will not be).
Your second sentence is correct 🙂
This only happen for the starting issue price right? Afterthat the share price of subsi should be based on its own performance?
Yes (although the holding companies performance is likely to also have some influence).
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