Decision Diagnostics Corp (DECN)

[DrZem]

Reverse splits devastate shareholder value?

I think this is just the kind of thing that Fufat was trying to get to. There aren't billions of DECN shares, shareholders have done the equivalent of turning in 100 pennies for a dollar bill.

Of course I agree with Aldry on this - market cap is a good value of market value, and stock prices are not a good metric to compare company values.

But!

Neither forward or reverse splits, by themselves, directly affect stockholder value. So the assertion that history of reverse spits has devastated shareholder value is either misinformed or designed to mislead. It's a basic misunderstanding about the difference between causality and correlation.

So for example, history has shown that longer woman's skirts have had a devastating impact on the value of stocks. For a period of time, this was true, from a correlation perspective, but everyone now agrees, that long skirts did not cause 70's stock market price changes.

So it is with stock splits. If I own 100 shares of a stock that is valued at $1, and it does a reverse, 10 to 1, split, I receive 10 shares worth $10 each and my total investment is still $100. The split made no difference at all from my personal balance sheet's perspective.

It may make a difference to some people's perception of the stock (e.g. it may no longer be a penny-stock, it may become more liquid ...).

IMO, the assertion that reverse stock splits are (always) bad for shareholders is pure FUD.