Sunday, February 23, 2014 8:57:47 PM
http://investorshub.advfn.com/Triple-000-and-Sub-penny-Chart-Plays-23986/
Beware of the Reverse Split
There is yet another way your .0001 investment could dwindle to oblivion. If a company can no longer drive demand for their stock, and cannot get it off the metaphorical .0001 "floor", their only recourse is the dreaded Reverse Split. A Reverse Split, or RS, if you don't know already, reduces the number of shares outstanding while simultaneously raising the share price at the same ratio. If they enacted a 100:1 RS, and you had a million shares at .0001, you would be left with ten thousand shares at a price of .01. The share price goes up, (to dilutable levels…) but you are left with fewer shares. The problem with reverse splits is they are seen as the worst possible event in the penny stock world, and almost always lead to a massive selloff when they're announced, and then often once they are executed. In the aftermath the stock you own that started off at .01 post split, might settle at .0035 or so. You're left holding onto a 65% loss, but the company is left with 35 ticks of share price to dilute… Trip-zero stocks have the highest risk of reverse splits because it is usually the company's only option to continue 'utilizing' the stock, and most trip-zero stocks didn't get there from solid management and profitable business plans. Many are scams and dilution schemes that will dilute to oblivion, reverse split, rinse and repeat.
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