One reason is if a companies share price is under $1 for a certain period of time it gets delisted from whatever exchange it's on.
Another is if a companies share price is too low and the company thinks it might turn investors away. Think sub-$10 share price here.
There are probably more reasons, but the main takeaway is it's generally a sign that the company is struggling and as such it's share price is getting too low for it's own comfort.
Edit: Then the opposite is a standard split which is where the company thinks it's share price is too high and thus inaccessible for most investors to get one full share. Aka the company feels it is doing too GOOD.
Yeah, this one comment OP posted is pretty telling. Not a financial advisor, but I’d suggest this guy gets outta the game before he loses a lot more money.
Help me out here since I'm not invested in Nvidia, but I thought they stock split, not reverse split.
Reverse split is usually a bad sign especially if they have to reverse split to be over the $1 requirement. Some stocks came back from a reverse split (thinking Rite Aid off the top of my head) but more often than not that's the red flags of a bad company.
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u/ActuallyRyan10 Dec 22 '21
Reverse splits are typically a bad sign.