Virgin Galactic celebrates flight hiatus with a reverse stock split Virgin Galactic has confirmed a reverse stock split in an effort to stop the company from tumbling out of the New York Stock Exchange. The stock took a sharp dive on the announcement, which was at the top end of a proposal put to shareholders ahead of the company's June 12, 2024, annual meeting. The proposal gave a range of 1 …
literally it would a join, or potentially a highly hazardous balletic or gymnastic manoeuvre.
According to Investopedia
"A reverse stock split is a type of corporate action that consolidates the number of existing shares of stock into fewer (higher-priced) shares. A reverse stock split divides the existing total quantity of shares by a number such as five or 10, which would then be called a 1-for-5 or 1-for-10 reverse split, respectively. A reverse stock split also is known as a stock consolidation, stock merge, or share rollback and is the opposite of a stock split, where a share is divided (split) into multiple parts."
A bit like a nation having suffered severe inflation issues new banknotes like 1960 France where 100 old francs = 1 new franc.
My not being the full bottle on high finance I don't quite see how should work:
"[this reverse split] would facilitate our ability to raise additional equity capital"
come for snark, go away learning something to add to the not quite full bottle
> I don't quite see how should work:
> "[this reverse split] would facilitate our ability to raise additional equity capital"
A few ways...
1) If they get booted off a major exchange, then they become perceived as "less desirable" by gambl..er...I mean investors.
2) People have perceptions about a company often based strictly around the stock price -- too high, little people can't easily buy a few hundred shares. Too low, "scary. If they were a healthy company, they'd not be selling for $0.05/share". So through splits and reverse splits, companies try to stay in the perceived magic zone. Still, a split hints at a health stock (not necessarily a healthy company), a reverse split screams "THERE'S A PROBLEM HERE!". I can't think of any reason why a healthy company or healthy stock would reverse split, unless it was a badly run company that suddenly got their act together...I guess that COULD happen.
3) Why do they care what people perceive? Because while historically, stocks represented ownership in a company, now many startups and some long-established companies use the stock market as a "Go Fund Me" tool to keep the lights on and make payroll, not to make the company better and with no plan to turn the business into something that can pay for its own operations. In the old days, you would float new stock to pay for a new building or technology upgrade, so that stock ownership had a symbolic meaning. Now...you sell new stock fabricated out of nothing when you run short of money (again), you sell "At The Market" (ATM) price, rather than going through a big formal issuance of new stock.
Yes, the investors are getting ripped off, and I'd feel sorry for them, if they were actually thinking they were investing in the company. But as most of them are just gambling that other people will think the stock more valuable (or less valuable!) in the future, it's just scammers all the way down...
Anonymous coward, because I work for one of these companies (not one you hear about on the news, and not a tech startup).
"My not being the full bottle on high finance I don't quite see how should work: "[this reverse split] would facilitate our ability to raise additional equity capital""
What they mean is that if they don't bolster the share price they'll get booted out of the the New York Stock Exchange, and THAT will make it much more difficult to raise equity capital.
... because of an arcane rule that judges eligibility based on price per share, rather than total valuation of the company?
Here, I'll start a company with $1000 in the bank. I'll issue one share, and it has a value of $1000 (*). Can I join the New York Stock Exchange now please?
(*) Or it could be worth substantially more, if my company has "AI" in its name
Is it just me, or do all of craft featured in the Beardo Space Programme look a big bit home made? The sorts of things that might be cobbled by a couple of mad enthusiasts in a shed, working with a pile of Reliant Robin parts. And if they're worried about the need to raise more equity, BSP are apparently going to ask for more money off gullible "investors" to build more of these things.
Should I be surprised? Nope. Look at the Stratolaunch Roc, which looks like a BSP project on steroids. I'd love to see one take off, but even so it does look like the sort of mad concept I built out of balsa wood aged 12. And I'm afraid to say that didn't last long.
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