Perceived Benefits of Upcoming 5 for 1 Forward Stock Split;
Here's some commentary pertaining to the potential upside associated with SNWT's planned forward split.
Upward Trend: many investors believe that a forward split indicates a positive, upward trend in the company's pps and positions them to own additional shares, which are poised for short-term appreciation.
Research indicates that institutions purchasing shares before a forward split are likely to obtain earnings increases over both the near and short term (note: this has to be positive on some level for us retail investors taking a position as shareholders of date for the upcoming fwd split).
Evidence supports a correlation between institutional ownership and forward stock splits.
Greater overall share ownership will facilitate a more diversified shareholder base.
Increased daily trading volume and sub-$1.00 share price will help SNWT to a appeal to a wider audience of traditional penny stock investors.
Increased liquidity: in theory, a larger supply of cheaper shares will encourage retail trading which therefore increases liquidity for shareholders.
Increased retail ownership plays a key role in combating PPS volatility going forward as research indicates that retail investors have longer holding periods than their institutional counterparts.
Psychological “BUY” signal: many investors subconsciously associate the forward stock split with a buy signal and view the action as a prime indicator of an explosive situation. Although a forward split surely does not always indicate a buy, the perception phenomenon is profound.
Potential Downside
Two potential areas of downside to this decission include (1) the chance for increased volatility as a result of increased trading volume; (2) a downgrade to the shareholder population driven by the decrease in PPS. Note: these two comments are more applicable to forward splits executed by firms with substantially higher (i.e., >$50).
