Expect A Flood Of Reverse Splits
by Charles B. Carlson, CFA
Dow Theory Forecasts

Now that AT&T has implemented its reverse stock split - a one-for-five variety - expect other companies to follow suit.

After all, now that a company with AT&T's pedigree has undergone a reverse split, the stigma of a reverse split has been lifted.

That's not to say that reverse splits are a good thing for shareholders. Indeed, ample research has shown that reverse splits rarely halt a stock's downward slide.

However, most of that research has been focused on small, very speculative companies, not companies the size of AT&T.

What should an investor do when it comes to reverse splits? If it is a very small company, I would be more apt to pull the trigger and sell the stock than if it is a company with lots of assets and a decent financial position.

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