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Say you own 400 shares of SGLI @ a price of lets say $1 per share to keep it simple worth $400 SGLI does a 1-40 R/S you now own 400 divided by 40 = 10 shares which you now own but each share is now worth $40 $40 X 10 shares = 400..... The problem with most penny stocks that do this is that there is usually a sell off following a reverse split "not always" but most of the time. so the price per share now drops. Lets use the example above say there is a sell off & now the PPS = $20 a share and you only have 10 shares you now only have $200. Many penny stocks that do these R/S tend to do another R/S again which further hurts you the investor. BTW the ticker symbol changes after the R/S and after the dust settles new unsuspecting investers may buy into the company not knowing that the company is infamous for Reverse splits and BAM they do another R/S and the cycle continues.... The only ones who make money are the company scum bags who use this method to line their own pockets. JMO.... Not all R/S are bad ones some are in an attempt to make it to the NASDAQ etc....but most penny stock R/S aren't good for the investor or trader. Hope this helped....
[ February 04, 2005, 22:08: Message edited by: *Magnetic*Microspheres* ]
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