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Q Kilenc(6/12)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Q Kilenc(6/12)

  • This topic has 9 replies, 3 voices, and was last updated 9 years ago by John Moffat.
Viewing 10 posts - 1 through 10 (of 10 total)
  • Author
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  • May 1, 2014 at 9:43 am #166990
    hasanali95
    Member
    • Topics: 239
    • Replies: 248
    • ☆☆☆

    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?

    May 1, 2014 at 5:36 pm #167031
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    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.

    November 11, 2015 at 9:49 am #281678
    learner93
    Member
    • Topics: 16
    • Replies: 51
    • ☆☆

    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.

    November 11, 2015 at 3:52 pm #281742
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    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.

    November 12, 2015 at 2:03 am #281834
    learner93
    Member
    • Topics: 16
    • Replies: 51
    • ☆☆

    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?

    November 12, 2015 at 6:36 am #281862
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    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 🙂

    November 12, 2015 at 7:27 am #281876
    learner93
    Member
    • Topics: 16
    • Replies: 51
    • ☆☆

    This only happen for the starting issue price right? Afterthat the share price of subsi should be based on its own performance?

    November 12, 2015 at 10:02 am #281916
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    Yes (although the holding companies performance is likely to also have some influence).

    November 12, 2015 at 11:12 am #281931
    learner93
    Member
    • Topics: 16
    • Replies: 51
    • ☆☆

    Thank you so much sir 🙂

    November 12, 2015 at 12:21 pm #281945
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

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