posted
1. A company can only issue as many shares as they are authorized 2. One they run into the cap on the authorized, they either have to ask shareholders to increase the authorized (bad) or do a reverse split to decrease the oustanding shares but they leave the authorized shares the same (very bad). 3. The company then begins to print shares all over again until they run into the authorized again...and again...and again...in most instances, not all, but most. 4. In general, stay away from any stock that has announced they are going to do a r/s. See the thread devoted to that subject at http://www.allstocks.com/stockmessageboard/ubb/ultimatebb.php/ubb/forum/f/10.html
That is the short version, it isn't that cut and dried, some stocks will run and run despite this because this is the OTC:BB and Pinks world where NOTHUING makes any sense.
-------------------- I may be wrong, but I don't think so....
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posted
in the pinksheet and bulletin board market RS are generally to raise more capital. on the price gets to .0001 companies can only issue so many more shares and find people to buy them. so, the RS happens and what BULL stated happens. in the legit world, NYSE AMEX NASDAQ, RS are either to maintain the $1 minimum bid requirement for continued listing on an exchange or some companies do a reverse split to increase their exposure to institutional investors (many won't play with stocks under $5)..ie LH did a reverse split about 5 years ago and had a good run afterward. it had usually traded under $5 and the RS helped them get more exposure/coverage in the institutional world.
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