Reversed Stock split

Hi, lately I am getting surprised by the reversed stock split of a few stocks, for example Annaly Capital. A had a plan to build up the number stocks to earn a certain dividend monthly. But now it appears I bought some stocks for nothing, and then I hope the value didn’t drop to much.
I don’t know if these corporate actions are announced up front but if they are is it an idea to then directly inform those people investing in that stock? Then they could buy a few more stocks to get a full stock back or hold off buying additional stocks till the corporate action is complete.

1 Like

Hi @Sarglt thank you for your message, in the case of Annaly Capital, it has undergone a reverse stock split. This means the total company value is consolidated in fewer shares which increases the share price, although the company value remains the same. When situations like these happen an email is send to all the users that will be affected by it. :blush:

Your dividend amount will remain exactly the same in stock splits (either way), because the percentage you see in BUX (for example 8%) is just an indicator comparing it to the stock price, so for example 8% of $100.
The ACTUAL dividend amount will be $8, all companies decide to pay out an AMOUNT of dividend, not a percentage of the stock price in dividend.

So if a stock splits, or reverse-splits, the total amount stays the same, only the indicator compared to the stock price (in this case %) changes.

So in my example if the company decided to split the stock in a 1 for 5 manner, so $20 instead of $100, your dividend would become 40% dividend, but you’d still receive $8, like before. It works the other way around too.

1 Like

Hi JPeters,
I agree for a normal stock split but in case of a reverse stock split it could be that you will receive less dividend. For example.
If a stock pays €0.20 per stock you will need to buy 5 stock to receive €1.
But if during the reverse stock split they return 1 stock for 4 stocks you will receive money back and 1 stock for which you would receive €0.80.
So if you want to get €1 minimum you will need to buy 1 more stock.
So if I would have just submitted a buy of the 5th stock on 22-09 it could get sold for less then what I paid for it meaning money wasted.
Or if I would have owned 3 stocks I could initiate a buy of the 4th stock to ensure I get 1 stock back

1 Like

Hi Alicia, I got the mail on 26-09 and in the mail it stated my stock count as per 23-09. So I can’t do anything anymore but just look at the outcome. I would like to have received a notification before 23-09 so I could maybe buy more or if I was intending to buy a stock to cancel the order
Not sure when you get the notification when this will take place.

Fair enough, I understand your point better now :slight_smile:

The only thing I can suggest is start using a website like Seeking Alpha, add your positions on there (it’s not a broker, purely an information website) and keep an eye on news articles you get for your portfolio.

Don’t rely on your broker for news, they are there to sell you stuff. Informing you is of a relatively low priority as it costs them money and doesn’t return any.

3 Likes

to be fair, information is how many people get the impulse to daytrade or panic sell/buy. So it can definitely return them a lot of money, although it would be rather predatorial… :sweat_smile: But hey, we have seen worse from brokers.

2 Likes

Well, it is predatorial because brokers make money off transactions, directly or indirectly (in the case of BUX), that is why I said don’t rely on your broker for information.
It’s something you, as an investor, have to be keenly aware of. A broker is not your friend and neither do they have your best interest at heart. They just want to make money off you. Which is fine, that is how the system works.

2 Likes