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Message: Re: Reverse Split, the good, bad and in between....

Drago,

I see your confusion however you have to remember that the percent increases in your example are not an apples to apple comparison really for the same explanation that was just given to you by led because the denominators are different.     

In other words, if a company had 100 million shares outstanding and had earnings of 100 million dollars, then they earned $1 per share pre reverse split   

Post reverse split, the company still earns that same 100 million dollars because a dollar earned is still actually a dollar earned, but now with 200 million shares outstanding, they only earned 50 cents per share.

It follows that the share price moves in direct proportion to earnings per share so the bottom line is that the company’s bottom line of actual earnings earned would mathematically raise the stock price double post reverse split with fewer shares outstanding compared to pre split with more shares outstanding and so again what you are asking is not apples to apples.

Thus what you are suggesting would never actually materialize in that single moment in time and you would end up making the exact same profit, $1 per share pre split and $2 per share post split in your example.  

Even more clear as mud I know and if this still doesn’t make sense then rest assured that any potential profit you make on this stock ever is exactly the same pre and post reverse split or vice versa as confusing and unfounded as it may seem.  

GLTAL

 

 

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