Why reverse split is never a good thingIts pretty simple actually.
isol issued a RS because they had to many out share and the average volume it used to get didnt affect the share price anymore so they have to drop the outstanding shares numbers. Here is were the problem start.
isol used to have about 1,5million share traded each days.
1,5 millions on a oustanding shares count of about 400million is not even 1%. Its basically not even 0,5%....
1% being 4 millions btw
now, with isol diminishing is share count to 40 millions 1% of this would be 400k shares
here is the probleme
if we 10x the price on the stock the volume getting from the share traded will be 10x lower...
meaning that the 1,5 million will become 150k which is still les than 0,5% of the outstanding share. Not to concider that many people trading this stock wont see it as a 4$ stock so they will simply avoid trading it so the volume will be even lower.... low volume = drop of the share price until people will be willing to pay for the stock price...
reverse split never been a good thing and never will because thinking that revers split get rid of the problem is an illusion because, sure in the first week youll get a lot of volume from day trader and all but once the noise about the RS stop this will drop drastically....
matter fact last stock that i saw having a RS ended getting delisted 2-3 months after