Integrated Ventures Inc (INTV)

[Doddi]

Reverse Splits Aren't All Bad!


Dig deep into the pool of laggards and you will find companies giving reverse splits a bad name.

Unlike a traditional stock split -- where a company seeks to lower its share price by multiplying the number of shares outstanding -- a reverse split aims to prop up a stock's price by exchanging a set number of shares into a single new share.

Forward and reverse splits are zero-sum games. If a company has 100 shares at $100, it's worth exactly as much as having 1,000 shares at $10 through a 10-for-1 split or 10 shares at $1,000 through a 1-for-10 reverse split.

The math is fair, but good luck telling some investors that. Folks still often ask when companies with high share prices will declare forward splits. Penny stock speculators dread the moment when their companies resort to reverse stock splits.


For example:

Sirius XM Radio Nasdaq: SIRI 1:10
Move Nasdaq: MOVE 1:4
Coeur d'Alene Mines NYSE: CDE 1:10
Laboratory Corporation of America NYSE: LH 1:10
priceline.com Nasdaq: PCLN 1:6


Cynics will argue that I'm only highlighting the exceptions to the rule, and that's fair. They aren't the only companies to beat the market since declaring stock splits.