Replies to post #74397 on Drinks Americas Holdings, Ltd. (DKAM)

[Toxic Avenger]

And though the shares are worth more the instant of the price change, in almost every case, they immediately fall in value. This is especially true of a stock at $.0001, because that's the lowest price a stock can trade at.

So at 1:1000 reverse split (every 1,000 shares now becomes a single share) on a $.0001 stock like DKAM, the pre-opening price will be 10 cents (1000x $.0001), but early trades will likely be below a nickel and it will quickly fall to a penny. Then it will likely head back to $.0001 over time as more and more shares get issued.

Companies don't generally change the authorized shares when they do a reverse split, so they now can issue many more shares and that dilution drives further price drops. In a 1:1000 reverse split for example, the company can now issue 1000 times the current maximum number of shares.

DKAM did a reverse split (1:250) in 2011. After that split, the shares traded about about 50 cents each. Today those shares are worth $.0001, for a 99.98% loss.