There are a few reasons why a company might choose to split its stock. Following a rise in stock price, companies like recent rockets Shuffle Master
Yesterday morning, Lakes Entertainment
This makes sense for an increasingly popular stock with a mere 8.8 million-share float.
Lakes Entertainment, as we have noted, has attracted attention from investors with the rising popularity of poker and the World Poker Tour, of which it owns 80%. The unit is expected to show a profit at some point this year and is set for an IPO later this year. But it's the core business of developing and managing American Indian-owned casinos, which currently produces no revenue, that accounts for the bulk of Lakes Entertainment's growth potential.
Because of that potential -- and because the stock had traded at a fraction of book value -- Lakes Entertainment more than quintupled over the past year to a current price near $26.50 per share. However, that implied value is based on four potentially lucrative casino projects that may or may not come to fruition. Such a wide range of outcomes makes the stock volatile, as does the modest float, some of which has been held out of play by investors like myself.
To its credit, unlike, say, a Rocky Mountain Chocolate Factory
That's OK in my book.
Give us your take on the Lakes Entertainment discussion board.
Fool contributor Jeff Hwang owns shares of Lakes Entertainment.
