Reverse Split Explained | Trading Terminology

[@hamzehghazawi9253]

thank you!!!!!

[@Outdoor143]

Thanks for the great explanation

[@ChristopherHooserhouse]

How do you reverse split 1 share?

[@1215DayTrading]

if you don't own enough shares to make a full share after a reverse split, they will usually cash you out and you'll receive the full value of your shares in cash.

[@OneNOnlyHD]

How many times can a company do this? Take the income fund like QYLD its been just down trending and losing money. Can the just indefinitely reverse split forever?

[@1215DayTrading]

QYLD is an etf and not a company. It has never done a reverse split. Usually companies do this to artificially raise their stock price to meet certain exchange requirements. The reason QYLD will probably down trend for the long term is because it uses a covered call strategy to produce a high dividend yield. Usually assets with large dividend yields (over 4%) isn’t good for long term holding as the price of the asset will decline over time

[@OneNOnlyHD]

@@1215DayTrading Oh right, yep I know what it is. I hold some covered call etfs, but can the fund just indefinitely reverse split as it down trends for the next 40 years for example? Every time the price gets to low, just reverse split? Or are there rules and regulations in place where the fund will eventually get delisted?

[@1215DayTrading]

@@OneNOnlyHD technically, they could. But doing so could negatively impact how people view that company and may make them not want to invest. Reverse splits are a sign of trouble. I don’t think companies “want” to do them but rather “have” to as a temporary measure

[@OneNOnlyHD]

@@1215DayTrading Ok thank you so much for responding! Last question. I found a video saying that the SEC requires a fund/company to have more than 500,000 outstanding shares in the publically traded market. When a fund reverse slpits the outstanding shares decrease, decrease, and decrease after every reverse split. Eventually wont the number of outstanding shares get to low at some point therefore leadning something like QYLD to get delisted? Or am i misunderstanding this and really can just keep reverse spliting a billion times?

[@1215DayTrading]

@@OneNOnlyHD I don’t know all the requirements for a stock to be listed on the major exchanges but yes, if a company fails to meet the requirements, they get delisted from the major exchanges and usually end up on the OTC market where there’s less regulation. Any company wanting to grow wouldn’t want to have this happen so while technically they could reverse split a bunch of times, they wouldn’t do it a bunch. If they did, the company would be in so much trouble that they would probably go out of business or get bought by some other company

[@user-db5ty4nx3e]

good Explanation! but you could´ve explained it in 3-4 minutes

[@1215DayTrading]

Thanks for the feedback! Yea I tend to go into more detail than I probably should