Question fro Stock Market guys

[Lunatic]

So I am not working and just killing time with projects around the house. To make it more interested and have something to play with I decided to play with little money.
I am buying and selling cheap stocks and doing ok. No way I could make money doing this, by the hr I am making pennies but in a week I made just under $300 from $500 buying and selling.
SO here is my question:
I bought a 3,900 shares at $0.14. The numbers were going up and down and I did not make a move on it last nigh when the stock was at $0.1399. This morning, at opening I am showing 19 shares at $28.73 and the opening market price at $19.00
How TF did this happen? I can understand 3900 to 19 at higher rate, giving me the same amount of money but how did I end up with my purchase price 34% higher that the market price. Just last night at closing I was 0.07% higher???
What happened here?

[dlist777]

It looks like your penny stock company did a reverse stock split.  Approx 205 for 1.  So, you had 3,900 x $0.14 = $546.  For every 205 shares you had they're giving you 1 share back.  3,900 shares / 205.26 = 19 shares.  Initially, this doesn't change the value of what you had. In theory the company was worth the same before and after the reverse split and you owned the same % of it (less shares but there are less shares outstanding).  That's why your new cost basis is 19 shares x 28.73 = $546.  Same $546.

The problem is that reverse splits are generally seen a sign of trouble for company.  It reduces the share float and decreases liquidity.  Often, companies do reverse splits because they are at risk of being de-listed and they want their stock price to artificially  go up to meet minimum listing requirements. Or, it might be a debt covenant that is based on stock price.   So, the market reacted to this by decreasing the offer price form $28.73 to $19.00.

If you search the ticker on yahoo, you should see some type of 8-K or press release explaining the reverse split and the reason.  

This is one of the many reasons that investing in penny stocks is more like gambling than investing.  

[Lunatic]

Thanks dlist. I figured the reverse split but could not comprehend how the value dropped so much before the market even opened,,, I still don’t 
this is not investing for me, I  never invested before in individual stocks. It’s more of f a play and maybe to learn something 

thanks 

[Zipper]

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