Reverse splits are when a company reduces it's share count, and thereby increase the stock price.
In other words, if you had a hundred shares in a company trading for .01, and they had a 2 for 1 reverse split, you would end up with 50 shares worth .02.
The end amount is the same.
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The reason reverse splits (R/S) are bad is that companies tend to do this when their stock is not worth very much to increase the value of their stock.
It typically follows when a company has overdiluted it's stock to the point that each share is worth very little - and now no one has interest in it. That company can then do a REVERSE SPLIT, which will reduce the amount of shares - and increase the value of each share.
THEN...the company can make MORE shares and do the same thing all over again. That is why it is bad.
HOWEVER...a reverse split CAN be a good thing if it is a company that was essentially mismanaged, now defunct, and it is trying to get a fresh start.
SO....you have to look at the history around a R/S very carefully and then decide for yourself what you think was going on.
Flaflyersfan posted a list of the stock history for ZVTK.
"Effective June 26, 2008, the Company authorized for its common stock a 50:1 reverse stock split Also, par value for the Preferred Stock and Common stock was changed to $.00001 per share All preferred and common stock and related information have been retroactively restated."
Keep in mind these facts as well:
1. The current CEO (Engel) was hired on October 2007, just prior to the reverse split. The previous CEO (David Stocknoff) was relieved after being accused of false advertising from selling their Diet Coffee product.
(By the way - coffee IS diet already. I never did understand this product. It has 3 Cal per 12 oz)
2. The new CEO found a new product (The Ionic Bulb), reconstructed the share structure of the company which he could only do with a REVERSE SPLIT, which effectively reduced the number of shares that people held in the company prior to his taking the job.
(For example: David Stocknoff, the previous CEO, still holds 2.5M shares of ZVTK. However, prior to the split, he must have owned 50 x 2.5 = 125 million shares.)
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These are the FACTS. Most people make assumptions that R/S is always BAD. It may have been necessary to keep this company alive at that time.
This information was all obtained from the last 10K and 10Q.
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Now....here is my SPECULATION:
In this case, it would seem that ZVTK completely RESTRUCTURED a defunct company with a new CEO and a brand new product.
The REVERSE SPLIT did screw all of the previous investors - but it also reduced the number of shares the previous owners had as well.
In this case, at least for us, the REVERSE SPLIT seems to have been a very GOOD thing.
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