Reverse stock split

viciam · 4 June 2013

Hi all,

In 2012 I bought a small amount of shares in the National Bank of Greece for around $1.50. Last week they announced a reverse stock split at 1:10. I had 200 shares and now I have 20 ADRs. Whilst the value of this remains the same, I can't help but feel I've lost out because if in the future NBG offers dividends, I will only be getting dividends on 20 shares rather than the 200 I paid for. Is this right?

This is the first time I came across reverse stock splits, so going by this I've lost money right?

Knobby22 · 4 June 2013

Dividends are paid as a % of profit.
e.g. If profit is $5000 and the payout ratio is 60% then the dividend payout will be $3000 split between the shares.
If there are 100,000 shares then each share will have a dividend of 3c.
If there are only 10,000 shares then the dividend will be 30c a share.

So, I wouldn't worry about that.

What I would worry about is holding shares in a bank in a country in which the banking system has collapsed and where the country is almost certainly going to default.

viciam · 4 June 2013

Knobby22 said:
Dividends are paid as a % of profit.
e.g. If profit is $5000 and the payout ratio is 60% then the dividend payout will be $3000 split between the shares.
If there are 100,000 shares then each share will have a dividend of 3c.
If there are only 10,000 shares then the dividend will be 30c a share.

So, I wouldn't worry about that.

What I would worry about is holding shares in a bank in a country in which the banking system has collapsed and where the country is almost certainly going to default.

So if dividends were being paid and a reverse split occurred, the dividend per share would increase which in effect would give me the same income had I owned more shares but received a lower dividend per share?

burglar · 4 June 2013

viciam said:
So if dividends were being paid and a reverse split occurred, the dividend per share would increase which in effect would give me the same income had I owned more shares but received a lower dividend per share?

Mathematically speaking, that is correct.
But we are not in a classroom!!

viciam · 7 June 2013

burglar said:
Mathematically speaking, that is correct.
But we are not in a classroom!!

How do you mean?

burglar · 19 June 2013

viciam said:
How do you mean?

You would be dealing with irrational people ... like me!

:

Let me explain ... there are reasons why a bank would do a reverse split!
They would not tell you and me why!?

So experienced traders and investors would go through their usual auction with this in mind.

My experience leads me to believe that share consolidations (reverse split) are the kiss of death!
My opinion only ... !

Reverse stock split

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