I would suggest to you that r\s be outlawed for all BB companies. Period...full stop.
What investors should be paying attention to is shares outstanding/market cap/and shareholder equity. (Balance sheet items.)
If you run up against a company that in a cyclical process/growth has issued too many shares to grow the business then a R/S is a necessary evil. A couple of examples of these screw ups is T and LU. The latter voting today to do an RS.
Investors have failed to pay attention to the items I have cited above to make sound investment decisions. LU has Shares Outstanding 3.61B. I was told long ago that it takes 40 years to count to a billion. It would take over 160 years just to count up the shares of LU. No wonder they don't have earnings.
Every time a company does a stock/merger deal it increases the number of shares. At some point in time if you don't have the necessary synergies and savings you end up with the necessary evil...r/s.
Since the OTC is rife with "fraud" I would rather take a look at Nasdaq/NYSE companies that have R/S'd to see how they have performed. I think what you will see is that these companies have "grown" the business beyond reasonable expectations/earnings.
But the necessary evil is only due to the investors/companies over buying to begin with. Don't believe me watch CSCO. The handwriting is on the wall at sometime in the future, IMO.
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