PSYC Corporation (PSYC)

[transcendself]

So I was curious as to the 1 for 100 r/s and found that it is the very highest rate of r/s there is. the company management gave the long term common shareholders the hardest gut punch they could it would seem. some of the highlights to my research-

Market Impact of Reverse Stock Splits
Generally, a reverse stock split is not perceived positively by market participants. It indicates that the stock price has gone to the bottom and the company management is attempting to inflate the prices artificially without any real business proposition.

Additionally, the liquidity may also take a toll with the number of shares getting reduced in the open market which is not a positive sign for any listed company.

Examples of Reverse Stock Splits
Per share price bumping is the primary reason for companies going for reverse stock splits, and the associated ratios may range from 1-for-2 to as high as 1-for-100.

A reverse stock split often signals a company in distress.

Regular instances of reverse stock splits include many small, often non-profitable companies involved in research and development which do not have any profit-making or marketable product or service. In such cases, companies undergo this corporate action simply to maintain their listing on a premier stock exchange.

In different jurisdictions across the globe, a company’s regulation depends upon the number of shareholders, among other factors. By reducing the number of shares, companies at times aim to reduce the number of shareholders which allow them to come under the purview of their preferred regulator or preferred set of laws. Companies that want to go private may also attempt to reduce the number of shareholders through such measures.

Companies which are planning to create and float spinoff, which is an independent company created through the sale or distribution of new shares of an existing business or division of a parent company, may also use reverse splits to gain attractive prices. For example, if shares of a company planning a spinoff are trading at lower levels, it may be difficult for it to price its spinoff company shares at a higher price. They may first reverse split their shares to increase the per share price, and then create a new company that has better chances of securing a higher share price.


see the whole article here:
https://www.investopedia.com/terms/r/reversesplit.asp