Reverse Stock Split Examples – Aig, Citigroup, Gm Etc
A company that announces reverse stock split is really in big trouble. Examples of reverse stock split (announced or executed) like AIG, Citigroup, GM, AT&T, Lucent, Cypress Comm. etc tell only slightly different stories of reverse stock split consequences.
A company that announces reverse stock split is really in big trouble. Examples of reverse stock split (announced or executed) like AIG, Citigroup, GM, AT&T, Lucent, Cypress Comm. etc tell only slightly different stories of reverse stock split consequences.
What is a Reverse Stock Split?
A reverse stock split put simply is opposite of a straight ‘stock split’. A stock split when announced by a company implies that they are planning to increase the number of shares of their company trading on the exchanges. Similarly a reverse stock split is announced by the company for an opposite effect.
A reverse stock split reduces the number of shares and also shareholders. It impacts the small shareholders, while the company management gets a benefit. It also helps the company from delisting or losing the support of institutional investors.
Examples of Reverse Stock Split in Stock Markets
There are a lot of instances of reverse stock split which is why it is impossible to note down every case here. But the consequences of a reverse stock split can be only few and that can be worthy of note for a shareholder.
Examples of companies that planned or went with a reverse stock split in stock markets are:
Airspan
Airspan announced and executed reverse stock split at 1-for-15 on September 18, 2009. After announcing the split, the share value fell down further. It looks like bigger share price gives a good instinct to sell more.
http://www.marketwire.com/press-release/Airspan-Networks-Inc-1046725.html
http://www.nasdaq.com/aspx/dynamic_charting.aspx?symbol=AIRO&selected=AIRO
AIG
The shares of AIG were split reverse at 1-for-20 on July 1, 2009 and they fell down by about 10% in share price on that day.
http://in.reuters.com/article/bankingfinancial-SP/idINN0149895120090701
American Metal & Technology
Shares of American Metal & Technology were reverse split at 1-for-150 on December 3, 2007. Though these shares did well immediately after the split, later they dragged down to hell till 2009. A good example of long term danger in reverse stock splits.
http://www.prleap.com/pr/104278/
AT&T
AT&T’s reverse split happened at 1-for-5 ratio on November 19, 2002, when at the same time it was selling its cable assets. After adjustment its shares did well and also it was the first company in DJIA index to have increased share price after a reverse split.
http://money.cnn.com/2002/11/19/news/companies/att/index.htm
Citigroup
Recently there has been news about Citigroup’s reverse stock split plan. Even in Mar 2009 there were rumors but then US government intervened and took 36% stake in the company. This is an exceptional case. But the shareholders of Citigroup since March are on a good ride!
http://money.cnn.com/2009/03/19/news/companies/citigroup/index.htm
Cypress Communications
Cypress comm. did reverse split at 1-for-10 ratio on August 27, 2001.
Domtar Corporation
At 1-for-12 ratio it split was announced to be on June 20, 2009. Its trend was intact and in tune with the rest of the market even after the split.
http://www.reuters.com/article/pressRelease/idUS118412+01-Jun-2009+PRN20090601
Finisar Corporation
Finisar announced 1-for-8 reverse split to be effective on September 25, 2009. The shares of this company are slowly falling down, may be in tune with the general market.
http://investor.finisar.com/releasedetail.cfm?ReleaseID=408548
General Motors
Though General Motors announced plan for reverse split at 1-for-100 in May 2009, it went bankrupt by the end of the same month.
http://www.bloggingstocks.com/2009/05/06/general-motors-reverse-split-plan-suggests-a-bleak-outlook/
A whole lot of other companies that announced reverse stock split:
Health Advancement Services Inc.,
Lucent,
MDI, Inc.,
Meade Instruments,
Palm,
Verenium,
Xechem
The story of all of them is same. Like the normal stock split, the share prices did little fluctuation for few days after the split and then went either in tune with the general market as if nothing had happened or declined further and further over a long time as if nothing could change their trend.
Hence it is always good to be beware of a company undergoing reverse splits. They may be bankrupt soon. If you are in such a situation, then better get out soon or run away with whatever profit you gained at that time.
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