asked:


I would like to know why one of the biggest Canadian companies is a penny stock? I’m a noob when it comes to the stock market i’m trying to understand the reason. could it be because it tries to attract any type of investor?

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    Comments

    3 Responses to “why is bombardier a penny stock?”

    1. underexposed... on May 2nd, 2013 5:15 am

      well it is on the high side of being a penny stock.

      As far as why, it is not because they position themselves there, after all it is the share holder buying and selling that decides what the share price is and the consensus is that the stock is it is worth $4 and change now.

      looking at this chart it has had a decent run from the lows of 2009 until August 2011

      And its dividend has been maintained throughout.

      One problem is its debt load of between $6-4Billion each year. They are in an industry that competes for the BIG orders of aircraft and trains…I think the recreational vehicle aspect was spun off years ago.

      As a result the demands for money and costs of getting these few orders are difficult. Right now I would expect such large orders are fewer given the state of the economy. for a large company by Canadian standards they are still relatively small internationally with a market cap of only about $5million.

      It has nothing to do with the company though…they don’t control the share price

    2. sdb on May 3rd, 2013 3:00 pm

      given the number of shares comprising the company, investors agree what each share is worth.

      the company controls only how many shares exist. With more shares, each share is worth a little bit less. Or with fewer shares, each worth more. The company could buy their own shares and essentially destroy them, or they could create and issue more shares. Or they could split shares (e.g. 2 for 1 or 3 for 2 or 10 for 9 or whatever they want) to create more for everyone, but each one worth less at the same ratio. Or do a reverse split to reduce shares and increase value of each.

      but don’t forget that investors tend to be moody and fickle. They change their opinion of value all day everyday the market is open. No matter what the company does, the stock price will change, not always rationally. E.g. A stock buyback is generally considered a good thing and price tends to go up more than math would predict. But not always. A reverse split also reduces shares, but is generally considered a bad thing, so the share price tends to go up less than math would predict (actually it is set to the correct calculated value, but then the negative perception drives it down). But not always.

    3. MVD34 on May 5th, 2013 2:12 am

      The short answer is that you can’t call everything that trades OTC or on the Pink Sheets a penny stock. Most things are, but one of the biggest exceptions are foreign stocks.

      The piece you might be missing is that Bombardier is listed on the Toronto Exchange (TSE). That is it’s “home.” So it isn’t really a penny stock in the truest sense of the idea. The OTC listing is for the convenience of the American market.

      Several very large foreign companies trade that way: Nestle and Deutsche Telekom come quickly to my mind.