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Technology Stocks : Ampex Corporation (AEXCA)
AMPX 10.38+7.4%Jan 14 3:59 PM EST
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To: killybegs who wrote (3349)9/5/1998 11:30:00 PM
From: Ed Perry  Read Replies (2) of 17679
 
<< feedback and debate ... on the reverse split >>

While I personally regard a reverse split as an instance of financial alchemy, it is true that institutional funds are often prohibited by charter from owning low priced stocks. There is also the mechanics of marginable stocks usually restricted to an initial position limit of no less than 5.00/sh.

For these, and perhaps other reasons, academic studies have shown announcements of reverse splits to have a long term positive effect on share prices. These effects are similar to but not as strong as effects from a customary split.

Finally there is the matter of the PE ratio. Once a stock implodes upon itself (in an "irrational" or "chaos based" sense), it's PE ratio not only falls off the radar screen but the stock becomes relegated to the "shadows". I think it was Ed Trepanski "How to Invest in Technology Stocks" who said that tech stock screens should exclude those issues with PE ratio's below 8. To paraphrase ... "too much trouble down there."

One slight segway which may be relevant here is the market breath enjoyed by AXC. Even at these historical and numeric low numbers, there is still an active market with trading mostly in the bid ask range of 1/16. To me this indicates an active following.

As an alternative to the reverse split, I would consider recruiting a capital advisory management firm after the pieces of the upcoming acquisition(s) fall into place. Since, these acquisitions have an opportunistic bent to them, nothing can be said at the present about future announcements.

Once the product service lineup becomes clear, then it would be time for the advisory service to get the hype machine cranked up. Here the active following nay be sufficient to achieve the desired effect.

Ed Perry

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