Replies to post #11638 on Reverse Splits

[sludgehound]

Good question, no real answer

Ok I've struggled with this too. You have to leave off the big outsiders that have like 1b O/S or a huge A/S going into announced R/S especially so if A/S just recently raised. Those are insider candy bags. See ihub board for Dilution warnings, it posts recent A/S increases.
Usually a good spike takes a very low O/S going into the R/S to have a stock spike before the R/S date. Even a small move say from 0.16 to 0.19 might have a good post R/S jump. And opposite true if it is dropping from .21 to .16 then means losing its base of last long time baggers. Will take time to regain fresh meat, if at all. See how FREE fell so hard post R/S then had decent bounce tho stalled now. Small O/S all along just not a big base of followers. SHIP is in same position right now with $1 level and may do same to keep the Naz listing. Dry bulks are weak at cheap end now, most play is in the very few higher end ones.
So sector can have impact. Biotech & cheap druggers are prone to spikes since they attract lot of spec players fast in/out. ROSG did that. OXGN DNDN may do so again.
Lot to watch for. No simple answer. Be cool if was....
Good trading.

[al44]

It is often mentioned that a reverse split is the kiss of death for a sub-penny

This is all you really need to know. In 2 decades of penny stock investing I have observed literally several thousand reverse splits. Of all those perhaps 2 or 3 have eventually been shareholder friendly in the long term. The large majority are followed by dilution as the company needs cash and either sells into the open market or seeks immediate cash thru toxic financing. Neither scenario is shareholder friendly. Sometimes the announcement comes after the markets close and are effective the following day allowing no one to exit. Also keep in mind there are a lot of scammers in the penny stocks. Watch the managements and keep a file of names and you will at times see the same names appearing in different tickers. Caveat Emptor at all times.

Hope that helps some

........al

[e-ore]

Here's my experience:
1. Unless there's a meaningful change of control to a quiet stock involved in the r/s it won't run before the split.

2. If the r/s involves a very cheap stock "in play" with a lot of promotion/news/volume but no change in management it is the kiss of death.

Example of #1:
TXMD - Was AHMN, split 1 for 100 (2011) from .01 to 1.00, now on the Amex at 4.40.
STDR - Was .02 when they announced merger and 1 for 40 r/s (2/14/13). Hit .26 a week later, splitting tomorrow, still at .10

[been there]

Honeycomb777 ..."How often...." IMO, from several years experience, almost never spike from r/s announcement point and the split occurrence.

[iwant1mil]

"A reverse split is the kiss of death for a sub-penny". That's correct in my book as well.

You asked "wouldn't it make sense for the powers that be to do everything in their arsenal to raise RAISE PPS in an effort to maximize the post split PPS?"
Yes it make sense, but NO they don't care because that's why they are doing the R/S. If they could allow the pps to rise, there would be no need for a R/S. The reason the pps continues to tank before they announce a R/S is because they are diluting for cash and can't stop.

Why do any company R/S? It's not to regain compliance as they may say. They have exhausted their available shares and still need more cash. Doing a R/S reduces the outstanding shares which then allow them to issue new shares. R/S is just a way to steal money from investors.