In the normal stock world, splits can be a really
Post# of 75384
Posted On: 07/15/2015 5:16:35 PM
Re: Makingmoney #6123
In the normal stock world, splits can be a really good thing, making a stock's price more attainable to new investors. Example: PepsiCo used it brilliantly in the 1980's, to split their share price from high $80 down below $30 using a 3:1 split. Sometimes the price can climb back upward, eventually reaching the original level, creating major benefits to the shareholders.
However, on the pinks, ALL splits can be catastrophic, causing many investors to lose interest in a stock. Often, stocks will try to use splits to increase a stock price in an attempt to meet a board requirement (minimum list price). Again, that can be a very tricky move, because investors often have a certain number of shares for a reason. Example: if I have 100K shares, I make $1000 for every penny of upward movement. If my shares are reduced to10K by a 1:10 reverse split, now the stock price has to move upwards by .10 for me to make the same $1000. Although, I lose nothing in the 1:10 reverse split, my position in the stock is changed drastically. Moreover, many brokers will not allow shareholders immediate trading access after a split, OR require a different trading process (like a call-in versus electronic trading). Obviously, that can rattle already nervous investors as well.
BOTTOM LINE: Splits can be tumultuous and risky. On BB stocks, sitting out a split can allow you to sleep at night, especially on the pinks. Just my opinion!!!
However, on the pinks, ALL splits can be catastrophic, causing many investors to lose interest in a stock. Often, stocks will try to use splits to increase a stock price in an attempt to meet a board requirement (minimum list price). Again, that can be a very tricky move, because investors often have a certain number of shares for a reason. Example: if I have 100K shares, I make $1000 for every penny of upward movement. If my shares are reduced to10K by a 1:10 reverse split, now the stock price has to move upwards by .10 for me to make the same $1000. Although, I lose nothing in the 1:10 reverse split, my position in the stock is changed drastically. Moreover, many brokers will not allow shareholders immediate trading access after a split, OR require a different trading process (like a call-in versus electronic trading). Obviously, that can rattle already nervous investors as well.
BOTTOM LINE: Splits can be tumultuous and risky. On BB stocks, sitting out a split can allow you to sleep at night, especially on the pinks. Just my opinion!!!
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