Reverse Split, the good, bad and in between....
posted on
Aug 13, 2018 02:10PM
So we may be looking at a share consolidation, and if one does happen the highest ratio would be 1 share for 5.
The one big positive for a reverse imo is that it would lift us out of penny stock status, even a 1 for 2 would take the US PPS over $5 at current prices. That's significant for me because I know that a lot of institutions and funds, they're not allowed to invest in stocks trading under $5. Plus a lot of trading sites, when you look for things like "biggest % gainers" or other such data, its defaulted for stocks trading over $5.
Another positive is the "potential" for RVX to have greater visibility for American and international investors, but just listing on the Naz doesn't mean we'd be assured of bigger volumes, especially if the number of OS is cut in half or more.
On the down side, there are a number of negatives that I see.
Firstly it could lead to a short attack. Its not uncommon for stocks that have just undergone a consolidation to attract the attention of bears. A stock that was $2.50 all of a sudden is trading for say $7.50, but with highly speculative non revenue generating companies, bears can see this as an opportunity to hammer the PPS and cover cheap because there are really no "hard" fundamentals to back up any PPS.
It also reduces liquidity. Right now RVX is close to having 180 million shares outstanding, and today we're looking at volume of only 65 thousand or so 2/3rds thru the trading day. While we have been seeing higher volumes the past 2 to 3 months, its not unusual for RVX to see trading days of just 10 or 20K for long stretches. If the shares were to be reduced even by just a 1:2 consolidation, then there's only 90 million or so. Yes institutions might start buying, but tutes tend to buy/hold, and that might only exacerbate the lack of liquidity.
And finally, on a personal note....Someone with 10,000 shares, they could engage in 100 single lot sales of RVX. Odd lot trading (less than 100 shares) can affect brokerage fees, speed of execution and ultimately the price realized. If shares were to be consolidated on a 1 for 2 basis then someone with 10K shares would go down to 5K shares and only 50 even lots of 100 shares each.
I would view a consolidation as a loss of flexibility for me personally. Not a huge deal, but a minor annoyance.