[mage lang="" source="flickr"]nasdaq penny stock[/mage]
are reverse stock splits a good thing?
ive been trading stock for about a year…mostly penny stocks…five bucks or lower, but i do have long term stocks….pepsi, ford..
anyways i ask this question because i am interested in this penny stock at .45 and they recently have requested a longer listing with nasdaq…and basically they are planing on doing a 7 for 1 rev. split.
now ive seen reverse splits done before and some actually worked out like aig for ex.
can this be a good thing?…the companys been around for over ten years
Penny stocks are notorious for using reverse splits. In my experience even if the company has been around long enough (like 10 years) is not a validation on the trustworthiness of that company. What you should do is see if this company has used a reverse stock split in the past and what the effects or results of that were.
The peril of penny stocks using reverse splits is that they may still end up being a penny stock soon after the split.
For example, say your company employs the 7 for 1 rev split at 0.45, then the new share price should be 3.15, however even though there are now less shares the value of the new shares may dip below 1.00 or even hover back at the same price as it was before the split. This could be due to the fact that even with the reverse split there are still too many shares or that the company is considered unreliable to reach a price beyond 1.00.
As always there will be risks when it comes to the market, more so with penny stocks.If you’ve done the research and still feel that the company will be better because of the reverse split than go for it. But there are more risks involved with reverse splits than normal splits.
Nasdaq Penny Stocks