1.I vaguely recall there being a rule of some kind that stipulates that one cannot purchase a share in a company whereby the price of the share in the said company has fallen below its cash equivalent - is this true?
2.There is a company called Eve Sleep ( mattress, bedding supplier) the market capitalisation of which has fallen to £3.85million - HOWEVER, IT HAS A CASH BALANCE OF £7.9 MILLION!!! The trading report this morning has been positive and I see this as a potential recovery stock. Do I now have to wait for this share price to increase until Eve’s market capitalisation is above its cash balance??? What would be the point of doing that as it defies the whole objective of buying low and selling high???
Similarly, if I was already a shareholder in a company whose share price fell below its market capitalisation, would I have to then sell those shares at that low price and buy back when the price recovered above-market capitalisation?? Why would anyone sell low, wait for the price to increase and then buy back??? It just doesn’t make sense.
Finally, there are many quoted companies which do not have tangible assets - eg, service providers, law firms, estate agents, medical research companies etc the main asset of such companies is usually the cash balance. However, I vividly recall that one cannot buy shares in a company where the debt exceeds 33% or if the cash balance is in excess of 33%.
I can understand why one should not purchase a company primarily running on interest-bearing debt in excess of 33%, but why should one not be able to buy into a successful company offering halal products/services just because it doesn’t own buildings/machinery or other form of tangible assets???