When Stock Splits Go Bad

[] (the downside of reverse stock splits) [View in browser]( [View in browser]( [] JULY 9, 2024 [] [] PROSPERITY PUB MARKET TALK When Stock Splits Go Bad With some high-profile stock splits happening this year — including AVGO's upcoming 10-for-1 split, we sat down with Jack Carter to talk stock splits... and he gave us some interesting info. One of the most critical points Jack emphasized was the distinction between regular stock splits and reverse stock splits. While regular splits can be a positive sign for a company’s stock, making shares of a stock that is rising in price more accessible to a broader range of investors, reverse splits often signal trouble. A reverse stock split usually happens when a company’s stock has gone down in price enough to turn it into a penny stock — or close to it. By doing a reverse stock split, a company reduces the number of its outstanding shares and increases the stock price proportionally. For example, in a 1-for-10 reverse split, every ten shares of a company are consolidated into one share, and the price of each share is multiplied by ten. Companies usually do this to keep a stock from being delisted from an exchange, such as the Nasdaq, where there are minimum price requirements. Why Reverse Splits Are Often a Red Flag Jack pointed out that reverse splits are generally a desperation move, a last-ditch effort to maintain listing requirements. "I can't remember a situation where I’ve seen a stock do a reverse split and it went on to become a good stock," Jack tells us. Companies that resort to reverse splits often face underlying financial issues that a simple stock price adjustment can’t fix. He warned that while the reverse split might temporarily prop up the stock price, it doesn’t solve the fundamental problems the company has. Another myth Jack dispelled is the notion that reverse splits make stocks more attractive by increasing their price. While the stock price might appear more respectable after a split, he reiterated that the underlying issues remain. The company's market cap doesn’t change, and the move often signals to savvy investors that the company is in distress. Jack told us that every stock he trades starts with a bullish trend. Regardless of positive news, great products, large cash reserves or anything else — if a stock is not in a long-term bullish trend, he will not trade it. Looking Ahead As we look forward to AVGO’s 10-for-1 stock split this coming week, Jack is quick to point out that this is a stock split worth your attention. With a pre-split share price over $1700, as well as a long term bullish trend and a leading position as a chipmaker supplying the AI ecosystem, the stock checks all the right boxes. — The Prosperity Pub Team [] [] Avoid This Common Stock Split Mistake! Every time a stock split is announced, Jack Carter sees traders get all excited… And the very next thing they do is make ONE common mistake! But after nearly 40 years in the markets, Jack’s got the art of the stock split down to a science… [And he wants to help you avoid making THIS common mistake!]( [] [] SCOTT WELSH’S TICKER TALES Second Time’s The Charm? (MS) Banks have been up and down quite a bit over the past several months. But right now, it looks like banks are looking bullish again. And, specifically, Morgan Stanley (MS) looks like it might be ready to break out. The last time MS reached this level, it teased a move and then pulled back. Now it’s coming up to that level once again. Here’s the chart: [] A break above $103.25 could lead to an explosive move. Sometimes the second time is the one. We’ll keep an eye on it. Happy trading, — Scott Welsh P.S. As a reminder, these plays are based on my longer-term Weinstein Stage Analysis method. The charts above use weekly candles and a 30 week simple moving average. For details on this method, see my explanation on [this Ask The Pros episode]( starting at timestamp 20:45. [] [] [] [] JULY 9, 2024 [] [] PROSPERITY PUB MARKET TALK When Stock Splits Go Bad With some high-profile stock splits happening this year — including AVGO's upcoming 10-for-1 split, we sat down with Jack Carter to talk stock splits... and he gave us some interesting info. One of the most critical points Jack emphasized was the distinction between regular stock splits and reverse stock splits. While regular splits can be a positive sign for a company’s stock, making shares of a stock that is rising in price more accessible to a broader range of investors, reverse splits often signal trouble. A reverse stock split usually happens when a company’s stock has gone down in price enough to turn it into a penny stock — or close to it. By doing a reverse stock split, a company reduces the number of its outstanding shares and increases the stock price proportionally. For example, in a 1-for-10 reverse split, every ten shares of a company are consolidated into one share, and the price of each share is multiplied by ten. Companies usually do this to keep a stock from being delisted from an exchange, such as the Nasdaq, where there are minimum price requirements. Why Reverse Splits Are Often a Red Flag Jack pointed out that reverse splits are generally a desperation move, a last-ditch effort to maintain listing requirements. "I can't remember a situation where I’ve seen a stock do a reverse split and it went on to become a good stock," Jack tells us. Companies that resort to reverse splits often face underlying financial issues that a simple stock price adjustment can’t fix. He warned that while the reverse split might temporarily prop up the stock price, it doesn’t solve the fundamental problems the company has. Another myth Jack dispelled is the notion that reverse splits make stocks more attractive by increasing their price. While the stock price might appear more respectable after a split, he reiterated that the underlying issues remain. The company's market cap doesn’t change, and the move often signals to savvy investors that the company is in distress. Jack told us that every stock he trades starts with a bullish trend. Regardless of positive news, great products, large cash reserves or anything else — if a stock is not in a long-term bullish trend, he will not trade it. Looking Ahead As we look forward to AVGO’s 10-for-1 stock split this coming week, Jack is quick to point out that this is a stock split worth your attention. With a pre-split share price over $1700, as well as a long term bullish trend and a leading position as a chipmaker supplying the AI ecosystem, the stock checks all the right boxes. — The Prosperity Pub Team [] [] Avoid This Common Stock Split Mistake! Every time a stock split is announced, Jack Carter sees traders get all excited… And the very next thing they do is make ONE common mistake! But after nearly 40 years in the markets, Jack’s got the art of the stock split down to a science… [And he wants to help you avoid making THIS common mistake!]( [] [] SCOTT WELSH’S TICKER TALES Second Time’s The Charm? (MS) Banks have been up and down quite a bit over the past several months. But right now, it looks like banks are looking bullish again. And, specifically, Morgan Stanley (MS) looks like it might be ready to break out. The last time MS reached this level, it teased a move and then pulled back. Now it’s coming up to that level once again. Here’s the chart: [] A break above $103.25 could lead to an explosive move. Sometimes the second time is the one. We’ll keep an eye on it. Happy trading, — Scott Welsh P.S. As a reminder, these plays are based on my longer-term Weinstein Stage Analysis method. The charts above use weekly candles and a 30 week simple moving average. For details on this method, see my explanation on [this Ask The Pros episode]( starting at timestamp 20:45. [] [] [] [] ABOUT US: We believe that the opportunity for financial literacy and freedom belongs to all people, not just those who already have years of investing experience. Prosperity Pub provides an array of educational services and products that will help you navigate the markets and become a better investor. Trading is made simple through our online forum full of trading techniques to give you the best tools to kick-start your investing journey. We offer collaborative webinars and training; we love to teach. No matter the opportunity, we bring together a strong community of like-minded traders to focus on analyzing market news as it’s presented each day. DISCLAIMER: FOR INFORMATION PURPOSES ONLY. The materials presented from Prosperity Pub are for your informational purposes only. Neither Prosperity Pub nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational purposes intended is at the user’s own risk. DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. Prosperity Pub is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions. Please visit [( for our full Terms and Conditions. [Unsubscribe]( This email was sent to {EMAIL} by Prosperity Pub 101 Marketside Ave, Suite 404 PMB 318, Ponte Vedra, Florida 32081, United States [Prosperity Pub]( [] ABOUT US: We believe that the opportunity for financial literacy and freedom belongs to all people, not just those who already have years of investing experience. Prosperity Pub provides an array of educational services and products that will help you navigate the markets and become a better investor. Trading is made simple through our online forum full of trading techniques to give you the best tools to kick-start your investing journey. We offer collaborative webinars and training; we love to teach. No matter the opportunity, we bring together a strong community of like-minded traders to focus on analyzing market news as it’s presented each day. DISCLAIMER: FOR INFORMATION PURPOSES ONLY. The materials presented from Prosperity Pub are for your informational purposes only. Neither Prosperity Pub nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational purposes intended is at the user’s own risk. DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. Prosperity Pub is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions. Please visit [( for our full Terms and Conditions. [Unsubscribe]( This email was sent to {EMAIL} by Prosperity Pub 101 Marketside Ave, Suite 404 PMB 318, Ponte Vedra, Florida 32081, United States [Prosperity Pub](