Post by
bayoubucks on Jul 03, 2018 1:16pm
reverse split
One reason for a reverse split is to get the price of the stock above a level required for a listing on other than the venture xchg.
The point you guys are missing is this. The price of a stock is a function of earnings otherwise known as the PE, price to earning ratio.
If you have half as many shares as before the split, then your earnings will be twice as much.
Example: 1 million shares
$1 million in earnings
EPS = $1
PE = 15x
Share price = 15x$1=$15
500,000 shares after 1 for 2 reverse split
$1 million in earnings
EPS = $2
PE = 15x
Share price = 15x$2=$30
So, no difference in your value. 1 share @ $30 or 2 shares @ $15
Comment by
bayoubucks on Jul 03, 2018 4:19pm
You say you understand, but you really don't. Sorry you just don't get it. In your logic, if the price went down it would be better to have less shares. Let's drop it, your mind is made up and you don't want to be confused with the facts.
Comment by
Sealthedeal2018 on Jul 03, 2018 4:48pm
I understand completely. I've been involved in reverse splits in the past. They don't benefit the share holder. In a reverse 2 to 1 split you get half the amount of shares. A 3 to 1 reverse split you get a 3rd less shares and so on. So in your explanation, as a share holder would you rather have 1,000 000 shares or 500,000 shares if the share price goes up .01?
Comment by
Sealthedeal2018 on Jul 03, 2018 5:09pm
Here you go bayoubucks, I think I understand completely https://theconservativeincomeinvestor.com/2018/05/01/reverse-stock-split-shareholder-impact/