Reverse, Forward stock split-makeiteasy.co.in

Reverse, Forward stock split-makeiteasy.co.in - Transcript

Reverse forward stock splits Companies will use reverse forward stock splits mainly in an attempt to save future administrative costs A reverse forward stock split involves two corporate actions
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The company will perform a reverse stock split and It will immediately follow with a forward stock split

The purpose of doing this is to cash out any investors who have a small amount of shares If the reverse split was done at one for 100 then any shareholders with less than 100 shares would be cashed out by the company After cashing out the smaller shareholders the company performs the forward stock split to bring the shares back to their original position The administrative cost savings come mainly in the form of mailings In particular money is saved by not having to print and mail proxies and other documents to smaller shareholders For smaller companies this can be a cost effective strategy that can help trim expenses The downside of doing this type of split is the message the company is projecting to small shareholders that they don t matter This can sometimes be detrimental to brand loyalty and result in negative public relations Another major area of potential cost savings from doing a reverse forward stock split comes from reduced regulation requirements should the company have less than 300 shareholders It requires companies with over 300 shareholders

to comply with the increased regulations under the act If the company is small enough a reverse forward stock split could reduce the number of shareholders enough to save the company a significant amount of money