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I noticed today, that a couple of the top gainers in the NYSE and the NASDAQ had reverse stock splits yesterday. SGY and DZSI show gains of ~300% and ~400% respectively. Each is associated with a 5 for 1 reverse split.

If I held stock in these companies yesterday, would I have profited by these gains?

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If I held stock in these companies yesterday, would I have profited by these gains?

No. For DZSI, your 5 shares at $1.10 would now be 1 share at $5.50, so you would have the same total amount. For SGY, they closed at $6.95, and opened at $32.80, so your five shares at $6.95 would now be one share at $32.80, so you would have actually lost money (not purely because of the split, but because the "new" shares are trading lower then the expected 1:5 split price).

A split in general does not affect market cap (how much your total shares are worth) but there may be residual effects that cause the market value to fluctuate after a split that affect the price.

  • 1
    ... particularly if there's a reason they reverse split, for which a common reason is "because the price is too low"... – Joe Mar 1 '17 at 17:46
  • @Joe That was probably DZSI's motivation - SGY emerged from bankruptcy and replaced the old shares with new shares at a ratio of 1-for-5.674558. – D Stanley Mar 1 '17 at 17:52
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These are not real gains. Wherever you're looking this up, the prices are not adjusted for corporate actions. In a reverse stock split the price of a single share multiplies by five, but as a shareholder you hold only one share after for every five that you did before.

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I just had a reverse split done 1 to 35. I went from 110,000 shares and a negative 13k to 3172 shares, and I still had a negative 13k. If your company does a reverse split take the lost and get out, it's bad news all the way around.

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I owned 2 shares of nspr when it split 50 to 1. I owned 2 original shares that I purchased for .145. Fourteen and a half cents per share. On Friday, 3/29 I had .29 equity value. On Monday, April 1 my equity value was $14.00. My shares value jumped over 4,000% and I sold my two shares for $14.00, that cost me less than 30 cents. Extrapolated by adding 4 zeros to my .29 investment amount and shares purchased increased by the same value, if I had invested $2,900.00 for 200000 shares, I would've sold for $1,400,000.00. How is that a bad thing?

  • This answer is about a stock split. The question was about a reverse split. They are different things. – zeta-band Apr 2 at 22:13

protected by Chris W. Rea Apr 1 at 22:50

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