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Concluding that a reverse stock split guarantees investors (shareholders) will ultimately lose the value of their investment isn’t correct.
It’s true that many reverse stock splits are declared by companies whose share price has declined significantly due to bad news, failing financials, or bleak prospects for the company’s future success. (((this is NOT TOMDF)))
Reverse stock splits may be proposed and make sense when offering a stock tender during an acquisition of another firm. ((((((this IS TOMDF))))))
The key is to do your homework. Reverse splits have a fairly negative reputation, but if the underlying company is fundamentally healthy, (((this IS TOMDF))) it may present an opportunity if other investors are getting out and driving the price down.
From the 6k;
Purpose of the Reverse Share Split
In addition, the Company believes that the reverse share split will allow for a possible listing of the ordinary shares of the Company on The Nasdaq Capital Market, which requires a minimum bid price of $4.00 per share. The Company believes that the listing of the Company’s shares on The Nasdaq Capital Market will enable the Company to maintain greater access to the public capital markets and will afford the Company’s shareholders greater liquidity with respect to their holdings in the Company.
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