A reverse split is often affecting the stock price
Post# of 32969
(Total Views: 443)
Posted On: 01/15/2019 6:35:01 PM
A reverse split is often affecting the stock price for psychological reasons: people believe they lead to a drop, they are afraid, hence they sell and it's a self fulfilling prophecy. Especially without good news to balance it out.
but it can also hurt the stock more directly if it is used for dilution. if the OS is reduced but the AS remains the same, the company can potentially sell many new shares, which is, in that case, actual dilution.
now not all dilution is fundamentally bad. it depends on the magnitude and the rationale behind it. diluting to stay afloat is not great, diluting for an acquisition is not that bad!
here, as some have said, the RS could be used to reach the minimum pps requirement of nasdaq (good! much better than a rs done to avoid delisting!) and possibly as a part of the sound concept acquisition (in that case I would call it a rational, worthwhile and moderate dilution)
personally I feel comfortable with the current situation. I trust the management.
flet'sinally, let's not forget a final positive note linked to a rs: the stock cusip changes and shorts have to cover their positions.
but it can also hurt the stock more directly if it is used for dilution. if the OS is reduced but the AS remains the same, the company can potentially sell many new shares, which is, in that case, actual dilution.
now not all dilution is fundamentally bad. it depends on the magnitude and the rationale behind it. diluting to stay afloat is not great, diluting for an acquisition is not that bad!
here, as some have said, the RS could be used to reach the minimum pps requirement of nasdaq (good! much better than a rs done to avoid delisting!) and possibly as a part of the sound concept acquisition (in that case I would call it a rational, worthwhile and moderate dilution)
personally I feel comfortable with the current situation. I trust the management.
flet'sinally, let's not forget a final positive note linked to a rs: the stock cusip changes and shorts have to cover their positions.
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