Replies to post #4729 on Intellect Neurosciences Inc. (fka ILNS)

[sliderulex]

Here's how a reverse split works. A company divides the number of existing shares by some amount, say for the sake of argument, they divide by 10. So if the company had 100,000,000 shares (one hundred million) and they do a 10:1 (also seen as 1:10) reverse split, the company divides their 100 million shares by 10, and now the company has 10 million shares. And if you had 10,000 shares, you would have your shares divided by 10 also, so you now have 1,000 shares. Everyone's shares are divided by the reverse split factor, in this case 10.

At the same time, the share value (pps) increases by the same factor. So if the share value were 0.10 at the time of the reverse split, the new share value would 1.00. Your new share count of 1,000 is still worth the same as your old share count of 10,000 because while the share count decreased, the share price (pps) increased by the same amount, thus creating equality. But as often happens in a reverse split, the share price (pps) will quickly drop days or weeks after the reverse split, so that the value of your account is less than what it was before the reverse split. And this dropping in pps after the reverse split is what people hate.

[elleryqueen]

It's very simple. R/S results in the pps going up--temporarily at least. So if you have 1,000 shares of stock selling for $1.00 and a r/s occurs at 2:1 you now have 500 shares of stock selling for $2.00. However, in the vast majority of cases the new $2.00 per share will not hold. Very often the pps will drop back to $1.00. Thus, the Common Stockholder is out $500.00 in value. For very healthy companies, r/s can be a wash or very little loss in value to the Common Stockholder. But for penny stocks which usually are in deep dudu, a r/s is the kiss of death for Common Stockholders. For penny stocks it is almost certain (with rare exceptions) the Common Stock holder will lose value. The stock price returns back to where it was originally or close to it. So why do a r/s? It's a way for management to raise money at the expense of the Common Stockholder. There can be contractual and loan agreement reasons that may force management to do a r/s. Always read the companies 10-Q's and 8-Q's for any kind of discussion about a future r/s. Hope this helps.

[rudyboy]

no, most of the time they do sink the value of the pps