I OWN SHARE IN A COMPANY ; REVERSE MERGER IS GOOD OR BAD FOR ME ??

Question

I OWN SHARE IN A COMPANY ; REVERSE MERGER IS GOOD OR BAD FOR ME ??

Answer 1

You're talking about reverse stock split, right? Since you said you own shares I'm making that assumption. If that's true, then here's what I have to say:

Reverse stock split in theory does not affect anything of the company itself. Say there is a company that the stock price is $1 a piece and has 100 shares outstanding. The outcome of a reverse 10-for-1 split will give us $10 per share with 10 shares outstanding. The market cap before and after is still going to be $100.

In reality, almost all reverse stock split is caused by depressed stock price. Some penny stocks probably want to do some reverse splits so that they don't look like penny stock. A depress stock price is usually caused by bad performance, so in general is not good. Also, this might affect the liquidity of the stock - that I can't say too much since I am not an expert in it. But don't sell your shares right away. Do some research and find out what is going on.

Answer 2

The term "reverse merger" can mean a couple of different things.  It can be used to describe a situation in which a public company is bought by a private company (a so-called "going private" transaction).  It can also refer to a situation in which a private company is merged into a public company that has little or no business operations (i.e., a shell company). This is a way for the private company to become a public company without the expenses of going through the registration process with the SEC.   Either way, whether or not the deal is good or bad for you depends very much on its proposed terms.  Even though I think the need for financial planners and advisers is often overstated, this is a situation in which you may want to hire a financial adviser.  Or, at least get the advice of a stockbroker, if you know one you trust.