Lets use GME as an example. It was trading @ $3, and you load up with 50k shares. Then they do a 5:1 reverse split so you now have 10k shares @ $15. If your price target was $30 in a few years (forget the meme movement) then your position would be worth 300k. Without the split your position would be worth 1.5M. We can't assume that the market will bake the split into the value, so it's likely the price target will not change. This is because stock price is completely divorced from the value of the company. Worse yet, if price ends up dropping to $3 again your position has now been reduced to 30k! You just lost 120k in value even though nothing has really changed fundamentally about the company.
NVDA could very easily be back up at pre-split price in a year just because the market thinks it can get back there. The market certainly won't say whoa...we can't go back to 1k unless the company has improved 10x times to compensate for the split. In fact I read somewhere that a certain percentage of companies will return to their pre-split price within a year.
AAPL on 9 June 2014 7:1 spit @ $656 (31 May 2014)
So after the split aapl was trading @ $93 and is today trading @ $214.29
Also is it 10:1 reverse split or 1:10 split? Is it the order of the numbers or the word "reverse"?
NVDA could very easily be back up at pre-split price in a year just because the market thinks it can get back there. The market certainly won't say whoa...we can't go back to 1k unless the company has improved 10x times to compensate for the split. In fact I read somewhere that a certain percentage of companies will return to their pre-split price within a year.
AAPL on 9 June 2014 7:1 spit @ $656 (31 May 2014)
So after the split aapl was trading @ $93 and is today trading @ $214.29
Also is it 10:1 reverse split or 1:10 split? Is it the order of the numbers or the word "reverse"?
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