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Technology Stocks : Ampex Corporation (AEXCA)
AMPX 12.44-8.4%Jan 30 9:30 AM EST
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To: killybegs who wrote (3349)9/8/1998 11:50:00 PM
From: David Wise  Read Replies (1) of 17679
 
One negative effect reverse splits have is to reduce float, thereby sometimes reducing liquidity which is also important to large investors. AXC has something over 60 million shares outstanding, so 1 for 3 would lower this to 20 million.

Worst of all is the implied statement that the company will not have any good news soon that would lift the stock without a reverse split. The psychology of a reverse is a killer. But I did see one reverse that eventually worked (and several disasters).

Check out FIBR for example. They went 1 for 3 recently, supposedly to get full NMS listing by having a price over $5.00. The initial post-reverse price was near $9.00, but each share is now below the pre-reverse price of about 2 7/8. This even though the outstanding went from 21 million to 7 million. So they now have revenues of about $100 million and a market cap of $15 - 17 million. To me the only good thing is that I bought some at this price and hope to see it at least back to pre-split price, soon, if they can get back to profitable.

My opinion on reverse split? Don't even think about it! But if eps stay level, it would be hard for the P/E to drop any lower. Yes it would be marginable, but if for some reason it dropped back below margin and people had to sell, the price would drop just like FIBR did. Believe me, it doesn't feel good being back to the pre-split price, post-split!
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