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Monday, July 05, 2010 9:12:32 PM
For arguments sake, let's say they do a 1 for 50 R/S, the stock price will go from it's current .0001 price per share, to .0050 per share, and it can immediately begin to trade DOWN in price from there...theoretically all the way back down to .0001 again, thus theoretically taking the current stock price lower, a couple more decimal places lower, than where it currently trades.
If you bought $1000 worth of stock today "because you'll never be able to buy it any cheaper than this", that investment could become worth considerably less after the R/S if the stock continues to drop in price. There are case histories of pennies having many R/S over a few years time period, causing a $10,000 investment in that stock to be worth 10 cents a few years later for anybody that held and hoped.
So, yes, the stock price can get considerably cheaper if you buy it now...which is exactly why there currently is no bid price. It is extremely rare for a stock to move up in price after a R/S, sometimes it does that first day, but 99.9% of the time the stock will continue it's downward price movement, because most of these pennies are financed by what is called "Death Spiral Financing", ie., there are loans with PREFERRED stock as collateral, allowing the lender to constantly convert and short the common stock, constantly driving the price down, constantly causing the company it raise the A/S and then eventually do a R/S again.
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