From what I understand it doesn't benefit shareholders. A reverse split is usually done to boost the avg pps and try to stop a downward spiral. Actually it is done to keep them from getting delisted on the major exchanges but mglg is not on a major exchange so that isn't in play here. They would do it to make the stock more appealing to buyers by not being as low but that rarely happens. On avg. a company that does a r/s usually has a decline in the pps of 35%-45% in the following year.
On another note check out bcle. How's L2 lookin, anybody??
Very well stated. Usually a company does have a decline in stock price. Here is the other ditty with it. Say you have 1,000 shares and it R/S's at 1 for 100. Well you would have 10 shares, at the same value, but now you have lost all of your leverage by 100 times. So you really lose big time. It is terrible for the shareholder.
whyyyyyyyyyyyy
what are the chances of picking a stock that literally drops 96%
i'm going to have to walk 20miles to get to work now
i just went to check on AQUI just to see if it was dropping.... but nope its kickin ass
Last edited by Sean; 09-03-2009 at 03:46 PM.
The bleeding seems to have slowed. I actually talked with a friend that said he anticipated this and had a buy order in @ .0003. So some people are still buying, and he said that he was prepared to long to see what happens with the TVA NG power plant. Interesting play, very risky. I think all of the flippers got out and a few longs shaken by the action. All in all, bad day, but not irreversable. I thought with news like this we would see .0002 or .0001 so to close @ .0004 not too bad, considering
if thats where we close??
Everything you are saying is totally true. Here is where I see the hang-up. O.K., everybody knows that when a company reverse splits it is because management is saying....hey things are screwed up and we have to jack that price back up to either a) Look good, b) to prevent delisting on an exchange.
Actually the best thing they could do is just make some money. That is why it always pays to see if a company has gone through a R/S before buying it.
Here is where I see the rub....you do the R/S for one of the above two purposes and if the stock is still perceived as crap, then it will only make gains or losses like it did before the R/S. In essence you have lost your leverage in share count. The R/S exchange is to make the stock look pretty as possible for the company. The stock will PROBABLY go down and you will just lose on that also.
Does that make any sense?
It is just not a good deal. This could very well happen to a company like MGLG. I am not saying that it will. I just brought it up because they were talking about it on the spoke.
Well ... hmmm ... I'm thinking tax write off