GE Announced A 8-1 Reverse Stock Split

Multinational conglomerate General Electric recently announced a 8-1 Reserve Stock Split. This comes on the heels of closing a $30 billion deal with with Aercap. This is a good time time to inform members what exactly is a Reserve Stock Split. Members should know there are many moving parts to the market and investors should be aware of there money.

GE is an industrial company that has been around for a very long time. It's a value stock with affordable share prices ranging from $11-$13. I've had GE in my portfolio for quite sometime. Its a well known brand with innovative ideas that can keep the company moving forward. It's a surprise they decided on a Reverse Stock Split.

A 8-1 Reverse Stock Split simply means if someone owns 8 shares, it will be combined into 1. Just imagine a pizza with 8 slices, but if I decide not to slice the pie that will leave me 1 whole pizza. Usually when companies do a Reverse Stock Split, they maybe in need for more cash flow.

The company will combine stocks, but your equity value and the value of the company will stay the same. If the company is valued at $1 billion and my equity value is $2000, the Reverse Stock Split does not change the value. Companies will announce the date, and when that day come, the share price will go up enticing speculators to jump in.

The down side is that small investors will get squeezed out. It's 8-1, so if I only one 1 share, it will go down the drain. There is not enough shares to combine into one. Price per share will shoot up, speculators will jump in to make a quick buck, but the price generally goes back down so be careful.

I hope members understand, if not send me an email with your questions.

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