***MUST READ: Reverse Splits****
Reverse splits in the pennies don't work the way you think because:
1. Legitimate and reputable companies that are profitable rarely if ever pull straight* reverse splits. There is no need for them to do so.
2. Reverse splits are associated with pumps and dumps. That's been the history of reverse splits in penny stocks. Companies do a reverse split to take excessive shares off the market. They almost always change the stock symbol. They sometimes change the company name to disguise themselves, coming up with a completely new business. Then they invent another "GOOD STORY" and start another pump and dump.
3. So if a penny company pulls a reverse split, it's usually the kiss of death. It destroys the company's reputation. "Investors" don't trust them anymore because there's always the thought the company is nothing but a pump and dump. The idea abounds that the company is in the business of selling stock and nothing else. Knowledgeable folks know that most likely the PPS will tank after a reverse split and they will lose most of their cash in the stock.
4. Because "investors" don't trust the company anymore, nobody wants to touch the stock, the volume falls off next to nothing and the stock goes dead - very little volume with almost no movement in the PPS.
5. Your multiplicity is killed. After a reverse split, the stock's PPS is so high it's difficult for you to make even 50% on it. You have very little chance of making much money in the stock because the number of shares you have is reduced to almost an insignificant number. If you're involved in a reverse split and end up with 1000 shares of stock at a PPS of .5 for example, the stock has to move to $1 a share for you to double your money. If the company has no business to speak of, no profits, very little revenue, etc, that's difficult. It won't move to $1 a share. Rumor and news with no concrete evidence of the company's viability will not sustain a PPS at that level in most cases.
Let's say you have 500,000 shares of a stock with the symbol CRAP and the price is .0010. You paid .0010 for it, costing you $500. For simplicity let's say they do the reverse split when the PPS is at .0010.
It's a 1/500 R/S. After the reverse split you now have 1000 shares at a PPS of .5000. You still have your $500 --- 1000 shares X $.5 PPS = $500. So you're still OK, no harm done, correct?
Au contraire. When the stock was sitting at .0010 before the R/S, it only has to move to .0020 for you to double your money. If it moves to .0040, you're quadrupled your money. A penny stock moving from .0010 to .0040 is a lot easier than one moving from .5 to $2 because a penny stock will run on rumor or just about anything, sometimes for no apparent reason, to .0040 from .0010. Rarely will a stock do so from .5 to $2, or even $1.
I used a 1/500 R/S in the example above. However, 1/1000 and 1/5000 reverse splits are common. Even 1/10,000 reverse splits happen. If you're holding 500,000 shares of CRAP and the company pulls a 1/5000 split, you now have 100 shares left. If the stock tanks after the reverse split, which almost always happens in the pennies, you're wiped out. With 100 shares, you have almost no chance of recovering your cash.
Now there are exceptions but they're rare. Legitimate companies actually making money can get away with small reverse splits because they have profits and their reputation to sustain the price of the new PPS. Microsoft or P&G could do one for example because everybody knows they aren't pumps and dumps. I guarantee you tho, even those companies would take some flack from their investors. Nobody likes to see their shares reduced.
Without getting into another long discussion with everybody, there is no evidence INSQ is a home-run hitting stock, as you said. I don't know how long you have been in the stock market, but knowledgeable investors with lots of cash don't mess with penny stocks. They will laugh at you if you try to convince them a penny company is a home-run hitting stock.
INSQ hasn't made a penny yet. As far as we know, they have little or no revenues yet. ALL we have is company **PR~s saying they have contracts with more coming. All we have are predictions for the future. Contracts by the way can be canceled just as quickly as they were negotiated.
What drives stocks over the long haul is success, becoming stable and making money. INSQ hasn't done that yet.
What drives penny stocks over the short term is rumor and news. The news in more cases than not is usually nothing more than PR~s by the company promising great things will happen in the future.
Whether INSQ does become a home-run hitting stock depends if they can become successful. Nobody knows if they will. So far all we have is the company's word what they intend to do in the future.
I don't see INSQ as a home-run hitting stock in any sense of the word. It hasn't proven itself yet. You may believe it appears to be a home-run hitting stock and it may actually turn-out to be one, but it ain't there yet.
INSQ, VRDM and GSHF are simply penny companies that were at the right place at the right time when the news and discussion about ethanol and energy kicked-off.
IMO, therefore, a reverse split by any of these companies would be disastrous for the stockholders.
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