Citigroup just sent me its annual statement and ballot to vote on suggestions from its Board of Directors, which, among other things, extends its flirtation with a reverse split that began two years ago.
For those unaware, a reverse split is the opposite of a split, which is when stock prices get too high and the price might be split in half with each stockholder getting a doubling of shares. When this happens it’s a sign the company is doing well, but because the share price might be too high for a lot of action, halving the price makes it more affordable and shareholders get a chance at continued upward movement with more stock.
With a reverse split, a company is in trouble and stockholders lose their shares proportionately to effect a rise in the cost of the stock. So, if you had 1,000 shares of AIG when it split 1:20 in 2009, you wound up with fifty shares, but the price went from $1.15 to $23.
Here’s the rub. Everyone knows the new price is artificial and they’re not fooling
