Moleculin Announces Reverse Stock Split (2024)

FAQs

Moleculin Announces Reverse Stock Split? ›

Moleculin Biotech, Inc. (MBRX) will effect a one-for-fifteen (1-15) reverse split of its Common Stock. The reverse stock split will become effective on Friday, March 22, 2024. In conjunction with the reverse split, the CUSIP number will change to 60855D309.

Many times reverse splits are viewed negatively, as they signal that a company's share price has declined significantly, possibly putting it at risk of being delisted. The higher-priced shares following the split may also be less attractive to certain retail investors who prefer stocks with lower sticker prices.

Reverse splits also can diminish or force out small investors, who may not have enough shares to be consolidated. For example, if a company decided on a 1-for-50 reverse split, any holders of fewer than 50 shares wouldn't be offered a fractional new share. They would instead be paid cash for their shares.

For example, in a one-for-ten (1:10) reverse split, shareholders receive one share of the company's new stock for every 10 shares that they owned.

If you own 50 shares of a company valued at $10 per share, your investment is worth $500. In a 1-for-5 reverse stock split, you would instead own 10 shares (divide the number of your shares by five) and the share price would increase to $50 per share (multiply the share price by five).

In some reverse stock splits, small shareholders are "cashed out" (receiving a proportionate amount of cash in lieu of partial shares) so that they no longer own the company's shares. Investors may lose money as a result of fluctuations in trading prices following reverse stock splits.

One way is to buy shares of the company before the reverse split occurs with the plan to sell them soon afterwards. This can be profitable if the company's stock price increases after the split. Another way to make money from a reverse stock split is to short sell the stock of the company.

As previously noted, the reverse split itself doesn't result in any change in the value of an investor's position in a stock because the smaller number of post-split shares is offset by the proportionally higher per-share price. However, a reverse split can certainly change investor perception of the company.

The reverse stock split doesn't cause investors to lose money by itself, but the move can signal to investors that the company is in financial trouble, which can lead to a sell-off. This will lower the value of the stock price, and stockholders will lose money.

Selling before a reverse stock split is a good idea, but selling after the reverse stock split is not. Since you can sell before and after a reverse stock split, selling during one is optional. The main advantage of selling before the reverse stock split is that you don't have to wait around for it to happen.

How long does it take for a reverse split to happen? ›

A reverse split usually occurs the trading day after the company announces it. A company might do a reverse split to keep from being delisted.

The 1-for-70 reverse stock split will automatically combine and convert seventy current shares of the Common Stock into one issued and outstanding new share of Common Stock.

A reverse stock split may be used to reduce the number of shareholders. If a company completes a reverse split in which 1 new share is issued for every 100 old shares, any investor holding fewer than 100 shares would simply receive a cash payment.

Several of these studies allude to the notion that reverse stock splits might attract short selling activity. Kadiyala and Vetsuypens (2002) suggest that if reverse stock splits enhance liquidity, as documented in Han (1995), both the risk of a short squeeze and the opportunity cost of a short sale are lowered.

When the reverse stock split is effective, every 40 shares of WeWork Common Stock issued and outstanding will be combined automatically into one share of WeWork Common Stock.

Disadvantages of a Stock Split

A company cannot rely on a stock split to increase its value or market cap. A stock split divides the existing shares, thus keeping the market cap the same as before. Not to forget, a company must invest some amount to conduct a stock split.

While a standard forward stock split is generally considered bullish, a reverse stock split is typically considered bearish.

Splitting the stock brings the share price down to a more attractive level. The actual value of the company doesn't change but the lower stock price may affect the way the stock is perceived and this can entice new investors.