Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : InvestRight Club Challenge -- Ignore unavailable to you. Want to Upgrade?

To: Francois Goelo who wrote (1118)	3/25/1999 2:32:00 PM
From: R F B, Jr.	Read Replies (1) \| Respond to of 2662

Francois : The article makes several good points, however.... The general market mentality, imo, percieves a stock/company to be worth a certain price. When an $80 issue splits 2/1 down to $40, people believe the stock to be worth $80 and the issue tends to rise. Conversely with a reverse split. I've seen many issues reverse, 1/10, only to have the stock fall back to the price at the original split ... or... below. Why??? The market sees the stock as overpriced at current share value. Right or wrong is not the issue. The fact that it happens more often than not is the important thing from an investor's standpoint. Regards, RFB

To: Francois Goelo who wrote (1118)	3/29/1999 4:18:00 PM
From: Jeffrey L. Henken	Read Replies (1) \| Respond to of 2662

The study is flawed for our purposes because it does not include OTC BB stocks. OTC BB stocks often use a reverse split as an excuse to issue more shares in the form of debenture funding. These shares are then dumped out on the market at a discount to the stock's price often with no buying support. In the worst case scenario the debenture fund will also short sell the stock. It's not pretty. Even when you discuss NASDAQ stocks with remarkable trailing fundamentals a reverse split is often followed by price erosion. The market tends to look forward, not backwards, and there is usually a good reason why the stock price fell in the first place. For instance I can give you a small oil stocks symbol that I follow and have watched. A reverse split failed to maintain higher share prices for this company despite past earnings. In order for a reverse split to work the company must have strong fundamentals, receive strong retail support and avoid debenture financing at the very least. Regards, Jeff