Perils of share consolidations

Share consolidations are normally undertaken so that a company is more attractive to investors. They think that penny or sub-penny share prices attract speculators and not more serious investors. However, most share prices take an initial dip and many drift lower over the medium term.

One positive is that the bid/offer spread can be narrowed. Penny shares can have enormous spreads.

Remote tracking technology developer Starcom is changing its name to t42 IoT Tracking Solutions (LON: TRAC) and it is also consolidating eight shares into one new share. This happens on Monday 22 November.

The company is losing money so there is little to hold up the share price. The promise of new contracts has provided a short-term spike, but this is unlikely to be maintained in the next few days. Th...

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