I bought 1600 shares of a penny stock for about $90.00. I have been holding this stock for a few years. The company issued new stock at $5.00 per share but devalued my stock to its pre issue of $0.005 per share. They now say I have .2357 shares. How can they reduce the number of shares I hold?
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4If you tell us which company's stock you own, you might be able to get a better answer.– Ben MillerCommented May 8, 2017 at 1:28
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I think lottery tickets have a better ROI.– Pete B.Commented May 8, 2017 at 11:37
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2 Answers
How can they reduce the number of shares I hold?
They may have purchased them. You don't say what stock it is, so we can only speculate. Let's say that the stock is called PENNY. So they may have taken your 1600 PENNY shares and renamed them to 1600 PENNYOLD shares. Then they created a new $5 PENNY share and gave you .2357 shares of that in exchange for your 1600 PENNYOLD shares. This suggests that your old shares were worth $1.1785 or less than a tenth of a cent each.
As an example, MYLAN did this in 2015 as part of their tax inversion (moved official headquarters from the US to Europe). They did not change the number of shares at that time, but MYLAN is not a penny stock.
This is the kind of thing that might happen in a bankruptcy.
A reverse split (where they give you one share in exchange for more than one share) is also possible, although you received an odd amount for a reverse split. Usually those produce rounder numbers. A number like .2357 sounds more like a market price, as those can be bizarre.
Your question is missing information. The most probable reason is that the company made a split or a dividend paid in stock and that you might be confusing your historical price (which is relevant for tax purposes) with your actual market price. It is VERY important to understand this concepts before trading stocks.
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