Skunks, your point makes no sense. An R/S does NOT in ANY WAY lower the value of the shares, just like a split doesn't raise the value of the shares. It simply changes the OS and proportionately changes the value of the shares. Nothing gained, nothing lost. Continuously issuing shares and reverse splitting is the EXACT SAME as continuously issuing shares and not reverse splitting. Reason why people have a problem with R/S's is that it illustrates more clearly poor underlying value of a stock for the following reason:
No matter how bad a stock does it can't go to zero as long as the company stays alive. So, when a stock is diluted, more and more shares are issued, but the stock doesn't go to zero so the shareholders can't see what the dilution is truly doing to the stock. In other words, the shareholders can't see that the dillution is driving the value down way more than what's represented by the PPS. The PPS may say .0001, but the real value is infinitesimal (just above zero), it's just that the PPS can't go to infinitesimal, so it isn't properly reflected for the shareholders to see. However, when an R/S occurs, the stock then has room to drop. The stock drops because of dilution, and all the shareholders can see the drop. Therefore, all the shareholders think that the drop was caused by the R/S, when in fact, what is happening is the same thing that was happening before the R/S: DILUTION! Dilution causes the R/Sed stock to drop back and what is really happening is that the stock is getting closer and closer to infinitesimal. It's all the same really, and your arguement makes no sense. Your line of thinking is the reason why CEOs can dump billions and still be embraced by shareholders who can't see the true infinitesimal value of their stock.
AI
