| T.R | Title | User | Personal
Name | Date | Lines |
|---|
| 869.1 | | NEWVAX::BUCHMAN | UNIX refugee in a VMS world | Wed May 31 1995 12:53 | 12 |
| I'd be interested to hear this answer, too. A friend of mine has a
moderate amount of Rational Software stock; they specialize in object
oriented software, and had a nice jump from 1.5 a year ago to 3.5
recently. My friend got in around 2.5, but now he is uneasy because the
company is reverse-splitting 3 for 1, to around 10.5. I don't think
there is anything inherently wrong with such a move, but one has to
wonder why a company goes to the trouble to do this. Do they want their
stock to look more attractive to potential buyers? Is there some
advantage to having a company with 10,000,000 shares outstanding
instead of 30,000,000? I don't know.
Jim B>
|
| 869.2 | | NETRIX::michaud | Jeff Michaud, That Group | Wed May 31 1995 13:05 | 7 |
| See also topic 68 which does bring up reverse splits.
The main problem is that you could end up with an odd lot, which
may cost more to sell if your broker charges more for odd lot trades.
Plus odd lots have to be combined with other odd lots I believe in
order to get executed on the trading floor so you may get a slower
execution of the trade.
|
| 869.3 | Reverse Split=investor leaves | POBOX::CORSON | Higher, and a bit more to the right | Wed May 31 1995 13:31 | 15 |
|
The main curse with reverse splits is percentage declines in the
value of your holdings.
A $4.00 stock will not have the big declines a $20 stock would
on bad news right off the bat. While this sounds somewhat ridiculous,
10% being $.40 compared to $2.00, my experience with reverse splits
(Storage Tech and Navistar come immediately to mind) has not been
good.
Probably time to sell and reinvest in a company that is going to
grow its equity, not concentrate it.
the Greyhawk
|
| 869.4 | Often a bad sign | EVMS::HALLYB | Fish have no concept of fire | Wed May 31 1995 16:09 | 14 |
| There are exchange rules about the price a stock must maintain in order
to continue to be listed. Also most brokers have rules about the
minimum price a stock must have in order to be bought on margin.
To me, a reverse split means the stock has declined so far that the
company needs to implode in order to maintain eligibilities listed
above. Which usually means it's been on the decline for some time and
some distance, and bankruptcy is not far behind.
I remember taking a flyer on 10,000 shares of Softguard systems. It
floundered, lost its NASDAQ listing, reverse-split 10-for-1, regained
its NASDAQ listing, then went bankrupt.
John
|