^Not investment advice, just lulz.
It’s been a while since we’ve turned our attention to the Bandit, but you can’t possibly have thought we’d let this one go by without comment. While Citi may not have discovered the art of turning lead into gold, they’ve figured out a way to make their share price increase by 1,000%. And that way is, of course, a 10:1 reverse split.
Yep, as of Monday morning, Citi will no longer be a single-digit midget trading at four-fitty and change. It will be trading closer to $45 – but with only one tenth as many shares outstanding. That should render its market cap unchanged, but, theoretically, should have some kind of psychological effect, as if we are supposed to think a $45 stock is less worthy of mockery and more worthy of investment. And, using this logic, maybe they should’ve just gone for a 100:1 or so reverse split and aimed for the Googlesphere.
True, many fund managers won’t touch anything that trades under $5 – so there’s that. But there’s also a reputation for reverse splits to often be accompanied with a sense of sick desperation to stay afloat, which is never good.
And then there’s the whole volume thing. Low share prices always equal more volume. For example, when you go to a strip club, you can engage in a whole lot more transactions with a pile of singles than you can with a twenty. $C, with an average volume of 421m shares changing hands a day over the last 3 months, has accounted for a good chunk of the volume in the markets – making it rain like Lil’ Wayne of the Dow, if you will. With that volume no longer in play, will it start to look like the whole market is stagnating? Is the Bandit gonna screw it up for everyone?
And, of course, the LOLFed question… will we see $C make its way back to the Dollar Menu despite this skullduggery?