Shares & Derivatives
Incomplete information on shares
By Tan Kin Lian  •  June 25, 2009
[caption id="attachment_2773" align="alignright" width="150" caption="Photo by Clearly Ambiguous"]Photo by Clearly Ambiguous[/caption] Dear Mr. Tan It is easy for an ordinary share investor to be cheated when they are provided with incomplete information. Below are some examples: 1) The investors are told that a company has huge cash on hand to the tune of say several hundred millions of dollars which give the impression that the company is cash rich and hence will pay good dividend or ready for business expansion. But they are not aware that the company also has huge debt to the tune of say several billions of dollars to clear. 2) The investors are told that the current year profit of a company will exceed say $100 millions which give the impression that the company is making a lot of money. But the investors are not aware that the earning of the company is only a mere 5 cents per share because there is a total of 2 billions shares in the company. 3) The investors are told that the earning of a company has increased 100% over the past 3 years but they are not aware that the company share price has increased 500% over the same period. 4) The investors are told that a company is wining a big contract worth $50 millions which give the impression that the company business is very good. But they are not aware that the wining of a $50 millions contract is not significant to a company with annual turnover of several billions of dollars. Pang Source: tankinlian.com
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By Tan Kin Lian
Mr Tan Kin Lian (fomer NTUC Income CEO) started his insurance career in 1966 in a local life insurance company. He has also worked in various positions as a computer programmer, organisation and methods officer and consulting actuary. Mr Tan writes daily in his blog. The information in his blog is transparent and has an open approach.
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