>> Its not a good idea as most reverse splits do not work out for investors. <<
Really? and what research do you have that supports such a definitive statement? Could you post us a link showing research that supports that most reverse splits don't work out?
Many reverse splits come about due to companies running into so much trouble that their stock price craters to obscene levels. In an effort to either stay listed or prop up their stock, sometimes companies resort to reverse splits which are revenue/equity neutral but reduce your total shares you hold.
Say you have 1,000 shares of XYZ Corp and the shares are valued at $1. You have an equity value of $1,000.
So if XYZ corp were to enact a reverse split of say 1:2, meaning for every two shares you have, you would now have 1 share, your total share holdings would shrink to 500 shares but now valued at $2 so your equity value remains unchanged(500 x 2 = $1,000).
The rub is that the $2 share price sometimes erodes back to $1 so you have accomplished nothing... this usually happens when a company has underlying structural problems that are so big it is difficult to support any stock price.
I did a brief study using google several years ago on reverse splits and the conclusions I arrived at were murky at best... in the end every situation was different. Companies that reversed into strength, ie rising revenues, significant news etc tended to fair just fine while weak companies generally suffered even worse share depreciation.
>> I would be wary of the motives of a shareholder with a large stake in a company posting a subject line that there will be a reverse split. <<
Maybe it's because THIS poster is not trying to hype and pump the price. Maybe THIS poster didn't show up two weeks ago. Maybe you need to do more homework or get better sources, before you post nonsense and attack the credibility of others.
I would be wary of any new poster engaged in an unrelenting pump campaign of hyping the stock on a daily basis.
Nuff said...
