Posted by Odd Stock Trader in Trading | 0 Comments

Mar 29, 2011

My stock is reverse splitting, what does that mean and what does it mean for my money? I have just been through a recent reverse stock split and wanted to share with you what it can mean for you, your broker and most importantly, your money.

When a company wants to reverse split their stock, and in this case the ratio was a whopping 25:1 or basically every 25 shares is now 1 share. They will in turn increase the stock price 25 times, either making the stock look better, the earnings per share better or just to attract some new investors.

For examples purpose I will show you what happened in both my Scottradeaccount and my Zecco trading account to show you what it looks like after a reverse split, or even just a split. The company in question is $NEON or Neonode Inc.

After the news that Neonode was approved on Friday for a 25:1 reverse split, a few things went through my head, as they may be going through yours. What does it mean? Should I buy? Should I Sell? WHAT”S HAPPENING!?!

So I decided to so some searching on the topic and, for articles purpose hold the stock so I could share with everyone. What I found should help you out and don’t be alarmed either, reverse stock splits generally mean a good thing.

Hold The Phone, Don’t Panic or Sell base on Reverse Stock Split News

If there is one major thing about stock news that doesn’t direct point to a negative thing happening to a stock, then for the love, don’t go clicking that sell button. Reverse Stock splits can be interesting and can show some weird things in your brokerage accounts, take the two screen shots below: Both are of my Scottrade and Zecco trading account and the symbols look quite strange, ill tell you why.

Click To Enlarge

Top Image: Zecco Trading Account Middle Image: Google Finance Bottom Image: Scottrade Account

Adding The Extra Little “D”

When nearly every stock either splits or reverse splits, they must add on a new letter to the stock symbol indicating to everyone, especially new traders, that the stock split or reverse split. This basically give them the upfront story on why there was such a huge swing in the stocks price.

Basically the stock in question Neonode had the symbol NEON before the split and NEOND after the split, easy enough isn’t it.

Feeling Stuck?

Now during the first few days it seems that I am completely unable to sell the stock in my account’s this could be because of something I’m not aware of or just purely the fact the stock reverse split on me. Either way, both of my accountbalances are incorrect, showing I have my old shares and old price of the stock (.117).

Only because I am holding the stock for a long time this doesn’t really affect me in anyway shape or form. If you want to trade it, then it may be wise to dump it before the stock splits.

Share Adjustment and Price Adjustment

When your stock reverse splits, plan on having less shares of hopefully a less volatile priced stock. Generally when stock go through a reverse split the stock will be viewed in different forms. For those not knowing about it, they may view the stock and company as profitable and invest.

Just be aware, that when a stock splits or reverse splits, things are bound to happen, just as in life, you never know what may be lurking around the corner.