share acquisition example in notes- Dilutive effect Chapter 8

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August 26, 2017 at 2:20 pm #403661
bballhawk
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I don’t want to get into the weeds here, but I have a question about the illustration at the end of chapter 8.Viagem acquires Greca with stock and cash.
If we issue new shares wouldn’t that reduce the share price? In the ilustration Viagem issues 6000 new shares to acquire 9000 of Greca’s. Pre acquisition share value of 30000×6.50= 195000. If Viagem issues 6000 new shares wouldn’t that change the share price ( i.e 195000/36000) ?That comes around 5.42 not 6.50 per share.
I am missing something, but I can’t see it .
Great lectures. Thank you
August 26, 2017 at 3:03 pm #403667
bballhawk
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It seems like BPP does it the same way … and all the rest of the examples are done the same way.I guess we are supposed to ignore dilution.
It just seems odd to me, in theory that creates infinite value ….. by just issuing new shares.
Anyhow, not a huge deal.
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