Dichotomy of a Split...…especially with the junior mining. It gives management too much leeway in early decision making…only to be financially rewarded when they make errors.
The problem with reverse splits:
1. Existing shareholders get the short end – always.
2. Although they reverse dilution they are still the same company.
3. They are bad for management who holds large positions… but they still collect a severance or stay on the payroll only to start it all over (they learn this when they go for an MBA).
4. Generally, the SP drops further – often reaching new lows. This is evident with small cap companies that can’t make ends meet which is why they reversed in the first place.
5. A company that pays its debts usually perform forward splits.
6. The only way the share price will rise to its former glory is by a miracle (or by way of a new company).
7. Finally, it should not be legal. Failing managers should be forced to give whatever they have back to the shareholder and be accountable for misdoings – while ending up on the breadline with everyone else they betrayed.
GWH