I recently purchased 10 shares of Aston Martin at a approximately 80 pence per share which is £8 for the entire 10 and recently I get a message regarding a reverse stock split and my shares have now dropped to 0.5 due to a 1/20.
So let’s do a rough example…
With the 1/20 in place it becomes 10÷20 which is 0.5.
As the 10 shares costed me £8
Those 0.5 are costing me £8.
Whilst increasing the price of the share within
the company to gain more value/profits for themselves to try and save there downfall.
In other words, they are now focusing on pro trading investors.
Is that good or bad?
I am aware Aston Martin are struggling due to pandemic and they are doing something with mercedes benz.
I do apologize, I’m dyslexic and this reverse stock split is somewhat confusing as I’m new to the stocks
In cases of split or reserve split, the value of the company (market cap) remains the same regardless of the number of shares.
Low priced shares (,<$1 or <£1) can be open to a lot of speculation, manipulation and volatility, and increasing the share price by reverse split may reduce that.
My guess part of decision to RS it doesn’t look good for a high performance (and high price) luxury car producer to have such a low price after a high IPO. A competitor, Ferrari, shares are $200+. Looks count.
Normally from my experience, reverse split shares tend to go up for some days and drop significantly if their earnings report didn’t meet expectations.
I see Aston Martin as a good bet to hold long term ie 2 years or more, if you want to watch it daily then I’d probably sell as its a very volatile stock.
The split has enabled Aston Martin to go back to pre crash prices as being a penny stock and a top marque automaker doesn’t go together.
Great things ahead next year for aml I would buy and hold but diversify aswell to avoid getting caught out.
Personally 50p was a good buy in point but under a pound is still great value