Can someone please explain this notion of the Reverse Split being so detrimental to long time stock holders such as myself?
I understand that R/S generally have a negative connotation. However, they mostly occur when a company is doing poorly and the share price needs to be artificially buoyed to keep from being delisted. Doesn’t seem like a coincidence that they would announce R/S same exact day as they announced grant award. Not too mention they have been perfectly open about their desire to R/S and uplift for well over a year now. They don’t need to buoy the price, this thing is about to make a big move upwards.
I really think that maybe people misunderstand how a R/S works. For example say you have 150,000 shares pre split and end up with 1,500 after. The entire amount of shares available for the company also is shrinking. So if you have 150,000 presit at $.08 and 1,500 after at $8...the percentage of the company you own doesn’t change, only the price per share changes. It’s not like they are taking away your shares and increasing someone else’s. If they dilute the stock after this by issuing more shares to raise capital, then yes this is bad for long holders. Doesn’t seem to be the case since they were just awarded over $5 million.
I think people are getting too caught up in the...”if I have 150,000 shares and if it goes to $1, I have $150,000. They screwed me by making it $8.” At the end of the day the factor by which your share value would have to increase from $.08 to $1 is no different than $8 to $100. The share VALUE would have to increase the same percentage whether you have 150,000 or 1,500 shares. It’s really all psychological since it feels like something going from $.08 to $1 is easier than $8 to $100. That’s a fallacy. You aren’t waking up on Tuesday morning with your brokerage account seeing a revers split as well, you will have the same amount of capital as you did end of day Friday.
My point being, if you thought the grant award announcement would send the stock up to $.30, then it should have an equal into the $20s/$30s come Tuesday. It’s just a relative move depending on the number of shares of the company that exist. Pre split there was something like 255 million vs 2.5 million. That means this thing can move very quick on low volume.
The share price of a stock is based on NUMBER OF SHARES. The market cap is the number of shares in relation to the share price. Their market cap will be the exact same come Tuesday depending on which way the share price moves.
