Education-101 One More Time Concerning Reverse-Splits Again
So many Myths about Stocks
Example
Before split $.0014 shares X 20 billion shares = $28 Million Market Cap.
10,000 for 1 split
$14 shares X 2,000,000 million shares = $28 Million Market Cap
Note no change in Market Cap, and most importantly your percentage ownership
of the company remains identical.
Now a PE Example Pre Split
$10 Million Profit, PE 30 = $10M divided by 20 Billion shares = $.0005 X 30 PE = $.015
$.015 divided by $.0014 = Gain percentage of 1071%
$.015 X 20 billion = Market Cap of $300 Million.
Now a PE example Post Split
$10 Million Profit, PE 30 =$10 Million divided by 2 Million shares = $5 X 30 PE = $150
$150 divided by $14 = Gain percentage of 1071%
$150 X 2,000,000 shares = Market Cap of $300 Million.
NO DIFFERENCE!! Your share ownership of the company remains identical.
Ultimately MAXIMUM shareholder value will be unlocked by a reverse split.
Why?
Because a lot more major institutions and mutual funds are then able to buy the stock.
Regardless of FEELINGS these are the Facts.
No matter the PE level the percentage gain will remain the same.
Believe it or NOT there are WAY more investors in Big Board stocks,
and a LOT more money to be invested outside of pink land.
That is why we longs eventually want to get off this exchange and onto a big board.
Take a look at most any stock that came off of a small board onto a big board.
THEY DO WAY BETTER.
Best Buy is a great example, is was a sub dollar stock,
a penny stock and look where it went over the years.
Walmart came off of the OTC. It had 5 stores at the time.
REALLY big money is NOT in Pink Land.
Why do you think companies reverse split and get out.
Arguing the converse logic (false logic) Apple should take their $875 Billion Market Cap
and Forward split to $.0014 and have 625 Trillion shares in the Market because their stock will
appreciate faster. NOT TRUE. It would actually tumble in value as many
institutions and mutual funds would be forced to sell.
With this said, yes companies have abused stock holders with reverse splits,
and have never had any real sales, just selling shares to unsuspecting investors.
Just because one made a really bad stock pick and got burned, (92% of pink stocks)
does not mean all stocks operate this way. Certainly that is NOT the case here.
Now here is a chart of market sizes. There are only 2 major markets of investors.
Note the S&P 500 and the Russell 3000 don't even rank. No OTC, No pinks.
www.visualcapitalist.com/all-of-the-worlds-stock-exchanges-by-size/
Now print this off and take it to an accountant or a financial advisor.
This is stock investing 101 and fact. Talk to your accountant.
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