Reverse splits - good or bad

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Reverse Splits Good or Bad?


Disclaimer:

This is not legal or investment advice of any kind.

You are on your own.

These types of stocks are VERY risky.

You could easily lose all your money.


How do Reverse Splits affect stock price ?


We are going to do a series of articles on reverse stock splits -- what happens to the stock price and a series of legal and IR tips for companies that want to do them, so be sure to subscribe because you will not want to miss this vital information.


Knowing how reverse splits

affect stock prices is vital.


It is important to

companies contemplating

reverse splits

to know what might happen

to their stock price.


It is important to stock traders and investors to know what will happen to

the price of the stock after the announcement and in the longer term.


It seems to be a matter of general knowledge among stock professionals

that a small cap stock that does a reverse split will see its stock decline to the price that the stock started at.


In other words, if the stock was trading at five cents and did a one for ten reverse split, it should sell at fifty

cents, but the theory is that the stock will eventually go back to five cents.


If true, this would show management the futility of reverse splits, and would show traders a way to select stocks to

short or to sell.


We examine this hypothesis here by looking at some stock price charts.


SMTP reverse split of five to one announced on

January 3, 2014.


OWOO reverse split of 750 to one

January 2014.


DSNY reverse split of five to one was

announced January 8, 2014


GNCP denies wanted a reverse split on January 10, 2014. The stock goes up in March, then declines.


HRTX split of 20 to one announced

on January 14, 2014. The stock moves up, then

declines


TBIO reverse split announced

January 16, 2014.


HBRM reverse split announced on January 27, 2014.


DARA reverse split of five to

one announced on February 6, 2014.

The rest is a decline.


MYOS reverse split of 50 to one

announced February 10,

2014.

Stock goes up.


MDHI reverse split announced

February 20, 2014.

Stock is soft.


COOL reverse split was announced in June 2014. Large decline follows.


DJAK reverse split of 20 for one was announced on February 20. 2014.


GARB canceled a reverse split on

February 20, 2014.


TRXC reverse split of five to one was announced on April 1, 2014.

Sharp drop, then sideways.


PPRTF reverse split of two for one announced on April 2, 2104, followed by decline.


CGCC reverse split of 20 to one was

announced on April 4, 2014.


GNUS reverse split announced

on April 7, 2014. Stock shows

signs of life but moves down over

time.


It seems to me to be fair to conclude as follows:

In low priced, speculative stocks, the announcement of a reverse split is usually short term negative for the

price. Stocks with reverse splits usually decline over time.


More Coming

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Reverse splits - good or bad

Economy & Finance

Transcript of Reverse splits - good or bad