Taking On Obscured Companies

by David Jenyns on June 13, 2008

Investors need be wary of buying stock in obscured companies. Some obscured companies have fancy financial structures. On common stock in an obscured company, the market price per share bears no automatic relationship to the company’s asset value. Now the price includes a 10 percent premium over the asset value of $20. With rare exceptions, an obscured company pays capital-gain dividends in cash only.

To offset this, at irregular intervals a company may invite its stockholders to buy additional shares at a price below the current market price. An obscured company offers no arrangements for installment buying of its stock, or for periodic withdrawals. An obscured company may issue new shares once in a while, but its growth in assets is slow compared to an open-end company with a large number of local representatives continuously selling new shares.

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