Cumulus stock has been sooooo low that they are being threatened with delisting from the exchange. Enter the “reverse stock split” (10/12/16). Here Cumulus takes all their shares and converts each 8 shares into one.
So lets say shares are worth 32¢ a share. ? Multiply that times 8 and they should get $2.56 per share which doesn’t sound as meager. The problem is that traders know that this is a desperate move. Today Cumulus traded at $1.05 which means that had they not split, they would be under 14¢ per share. Will they have to do this maneuver twice…three times? How low can they go?
“Reverse splits usually signal trouble and do nothing to correct what’s ailing the company,” says Frank Fernandez, the manager of equity trading at J.P. Turner & Company in Atlanta. “It’s a maneuver used to get the stock price over a dollar so the stock doesn’t get delisted, though statistics show that probably three quarters of recently reversed-split stocks trade lower following the split.”
So how did we get here?
Greedy consolidation produces monstrous debt which causes the firing of talented DJs and staff. It was the local staff that made radio worth more than $1.05 per share.