RE:Rollbacks
templetooth2 wrote:
Rollbacks or "reverse" stock splits have an undeserved bad reputation. This probably comes as a result of the tactic being mostly employed by companies in a state of terminal decline. They reverse split in order to maintain a stock market listing but such a move does nothing to reverse the state of affairs which prompted the action. So over time, people have come to associate a reverse split with "more bad news coming."
On the other hand, there are examples where companies have graduated from a junior to a senior market, and to mark the occasion enlightened execs have seen the wisdom of having a $10 stock price (for instance) rather than 50 cents. Thus, a rollback to appeal to a posher clientele. Victoria Gold did this manoeuvre about a year ago and was handsomely rewarded.
The idea that a rollback implies future further declines is about as valid as the SuperBowl predictor of future market performance. You don't hear too much about the SuperBowl any longer, but for about 18 years it worked like a charm in predicting stock market performance for the rest of the year. If a team from the AFC won, it was game over. Or maybe it was the NFC team. Whatever. Then again, I've met people who firmly believe you should sell on Monday and buy on Friday. Or the reverse.
quite simply people think it's easier to go from 50cents to 5 bucks then from 10 bucks to 100.