'Alinea818' Actually the REAL R/S breakdown is that Current shareholders will lose everything!
All these Pinksheets that performs these R/S has resulted in little to NO benefits to shareholders!
Technically it's a "due-Processed" rip-off scheme!
1/ All the R/S does, typically, is displaces the decimal point above the floor, making room to dilute back down to it!
example; if the pre-Split PPS is .0004 on an RS of 1:500, the Post-Split = .2/share! (20 cents a share)
Sound and looks good, right? -----WRONG!
At least not good for the shareholders!
Because your pre-split shares are reduced by the post-spit amount!
example; 1,000,000 shares on a 1:500 R/S becomes just 2000 shares!
If you were to sell 2000 shares @ .2/share = $400
(post-split)
Which maintains the overall ratio of 1'mil shares @ .0004 = $400 (Pre-Split)
As you can see, only the ratio/decimal changed but the "market value" of your position remains the same!
Well, not quite for those having accounts with brokers that charges a "Re-org fee" for processing the split.
So you also lose money for every R/S that takes on a stock you own.
But here's the fun part!
Typically, the PPS tanks following every R/S done by a pinksheet company!
The $400 seed money you started out with remains constant.
But you DO lose parentages of ownership of "YOUR" $400 investment with every down tick as the insiders GAINS ownership of "YOUR" investment per down tick!
Therefore the lost of all of your $400 investment only means the insiders have pocketed it!
Which is typically what happens following every R/S done by pinksheets!
Because the PPS Post-split ends up tanked/diluted back down to its pre-split prices!
All while your remaining 2000 post-split shares are valued at just 80 cents!
Concluding the math;
Your initial $400 interment - (Brokerage R/S fee) - (.80 post R/S) =
[399.2 - (broker Fee)] = your total loss!
You are totally "in the negative"
The only winners are the Insiders ($399.2 you lost) and Brokers(Fees you paid)!
This is why an R/S done in the pinks are likely never a win for shareholders, while virtually free monies for the insiders!
In understanding the Risks!, I don’t mind losing in stocks that died TRYING, but I DO mind losing in stocks that died LYING!
