Nice work James Garner, page-44

Why Would a Company Reverse-Split its Shares?

''Investors have been trained by Wall Street to expect companies to split their stock, by adding to—not deducting from—their share count. And generally, those kinds of stock splits are good news.

But that is usually not the case with reverse splits. In fact—with a few rare exceptions—reverse splits are bad news for investors. Here’s why:

The number-one reason for a reverse stock split is because disalloweds—like the NYSE or Nasdaq—set minimum price requirements for shares that trade on the exchanges. And when a company’s shares decline to near—or below—that level, the easiest way to stay in compliance with the exchange is to reduce the number of outstanding shares so that the price of the individual shares—like magic—automatically rises. And when that happens, the company’s shares can remain trading on the exchange.

Of course, while the shares may get an initial boost, don’t expect it to last. If a company’s fortunes—and shares—have been waning, savvy investors will see the reverse split as a big red flag and continue selling, sending the shares back toward zero.

Most—although not all—reverse stock splits are seen in small penny stocks that have not been able to attain steady profitability and create value for their shareholders. I found that was the case in most of the biotechs’ recent reverse splits. Many are on the verge of bankruptcy, and they use a reverse split as a last-ditch effort to revive their failing fortunes.
But sometimes, companies will effect a reverse stock split so that their shares trade higher, with the intention of making them more attractive to mainstream investors and/or to ease the way to listing on a national exchange.''


https://cabotwealth.com/daily/how-to-invest/reverse-stock-splits-shareholders/