There is no point in making pre/post stock split comparisons. This is not a reply to Dennis' post in particular, but several.
Any stock at any time is subject to a certain expectation in terms of earnings that is captured in the PE ratio. Whether before or after a Reverse Split, the expectation is the same. The stock is also subject to all of the other financial conditions of the company at any time, which is of course impacted by the R/S. I am of the belief that all that matters to investors is earnings, therefore the P/E is paramount. Right now the only use of the pre/post R/S comparison is in charting. The stock is at an all-time low and a level. That would suggest that there is a probability it will remain at this level, that is all.
uWink, on the other hand, did a R/S and had hopes of getting on the AMEX. This was justification for the split, as well as gaining capital for the purpose for expansion. They are executing on that plan more or less as stated. A little late, but not grossly late. In doing so, they picked up lots of cash, and magically ended up with about the same number of shares they started with. I often wonder if Nolan believed his own words when he came up with this, but no one can accuse him of deceiving anyone. He gave the market the facts and let the market decide. We as investors, knowing all information including financials, bought into it. No one to blame but ourselves. uWink was never dishonest. For example. the offering said that it was on a "best efforts" basis.... Just because there was talk of franchises does not mean they will materialize.
The subsequent fall suggests that many of those that bought in were not prepared to wait it out on that plan. They should have, based on future expectations and Time Value of Money. Again, their fault. We all knew it would be at least a year before the earnings picture would change. Dennis' post is simply saying that investors are not always rational, and this stock proves his point. So, it is up to investors to take advantage of that, or not.
Rawnoc made an excellent post some time back before any of this, in which he said that the expectation that the new restaurants would do well is built into the stock price, and hence it would not likely go up when they opened. He turned out to be right. I was wrong. The uptick did not happen and the speculators exited the market.
In a case like this you have to go back to fundamentals and make your own decisions. The MV restaurant will open, it will be popular with that crowd, and the business will finally be profitable or at least break-even, an in very short order. Lots of companies have had their stock bid up on expectations to an irrational level. Maybe that will happen again. Worst case it will recover to maybe the 1.50 level.
That is based on fundamentals and earnings, not hype. But we make our own decisions in a market in which investors are irrational and weird things do happen. I am frustrated by events of this week, but in looking at the fundamentals, will stay in until all 3 restaurants are up and running and doing well. I hope for a bubble, but it may or may not happen. Without there being firm plans in terms of franchises, I diversify (and get back into a regular sleep pattern). I am not going for a home run hit, just not my style. I will make somewhat of a profit, but it will not be a perfect execution on my part. It never is.
