Intellect Neurosciences Inc. (fka ILNS)

[elleryqueen]

It's very simple. R/S results in the pps going up--temporarily at least. So if you have 1,000 shares of stock selling for $1.00 and a r/s occurs at 2:1 you now have 500 shares of stock selling for $2.00. However, in the vast majority of cases the new $2.00 per share will not hold. Very often the pps will drop back to $1.00. Thus, the Common Stockholder is out $500.00 in value. For very healthy companies, r/s can be a wash or very little loss in value to the Common Stockholder. But for penny stocks which usually are in deep dudu, a r/s is the kiss of death for Common Stockholders. For penny stocks it is almost certain (with rare exceptions) the Common Stock holder will lose value. The stock price returns back to where it was originally or close to it. So why do a r/s? It's a way for management to raise money at the expense of the Common Stockholder. There can be contractual and loan agreement reasons that may force management to do a r/s. Always read the companies 10-Q's and 8-Q's for any kind of discussion about a future r/s. Hope this helps.