Brian -- Re Reverse Splits:
Most of the evidence I've seen on the subject clearly indicates that reverse splits have not generally been a good thing. But for the optimists among us, and as alluded to by Thotdoc a few posts back, here's an excerpt from the link below:
"There is also evidence that small cap stocks which reverse split their stock and can generate better earnings receive a benefit from the reverse split. These companies are trying to boost their price into a range which is more acceptable to traders. For these companies, a reverse stock split works well."
e-analytics.com
With so many stocks slipping into the low single-digits or the pennies these days, we're certainly seeing a lot of reverse splits being announced. In fact, they're becoming a dime a dozen (pun intended).
Even some of the (formerly) big boys are doing it, e.g., AT&T's proposed 1-for-5. But not all of these are necessarily badly managed or failing companies or those which will never generate any earnings . . . to a large extent, they may simply be victims of the recent/current very punitive and unforgiving stock-market environment.
One recent example of a tech stock that's performed quite well following its reverse split (1-for-10) is VRYA: It closed at $3.00 on the day its RS was effective (5/1/02), but is now trading at $4.20, up 40%, and it's been as high as $5.15 since the RS. But of course you might rightly point out that the stock is still trading somewhat below where it was in the months prior to the RS taking place . . . but so are about 99.9% of all other stocks!
And I would imagine that there are tons of other historical examples of stocks that performed very well in the months and years following their reverse splits . . . I'm gonna go try to find some right now.
But don't hold your breath awaiting my return ;-)
Best regards,
ea |
