Ok guys care with this. It seems a company can lower the price as much as they want and doing as reverse splits as they want. wich means they can TAKE your shares AND your money for FREE. Lets say you start with 100, after 2 splits you can just have 0 shares at 0.10$ The cash they will paid is So you buy 100 at 50$ but then you end with 0 for 0.10$ The court of washington said 22-July 2010 you have the right to have at least your cost basis+taxes. http://companycounsel.net/2010/09/2...y-shareholders-says-washington-supreme-court/ Can someone explain??? Should I write the SEC???
Your explanation is FUBAR! With 1:100 reverse split, you're "100 shares @ $50" would become "1 share @ $5,000/sh". After 2nd 1:100 reverse split, your 1/100 share would be @ $500,000/share.... same value to you as 100 shares @ $50.... notwithstanding any potential difference between "fair value" and "fair market value". Reverse splits may be a ploy to eliminate minority shareholders, but not to hose them out of their money.
I read it (well, most of it). I think OP got it all wrong. The regulators aren't going to let the company hose a shareholder out of the value of his stock via "stock split manipulation".
They say its not fractionable and paid for cash. They dont say in the SEC filling wich is the date. But as far as I understand they are not able no force steal shares out of customers that way. IF they want to force them and dont make fractions they should pay the cash for the shares BEFORE the split at price BEFORE the day before the split wich exactly MATCH with the price I bough them + taxes. Anyway thank you all for help, I will write some reg to look for an answer. I know my broker have nothing to do with it but maybe the company.
Thank you for providing a link to the article, which contains a link to that 2010 Washington State court decision about one of 3-4 partners being forced of a car dealership deal by the others voting to reduce the number of shares in the business to four, for, I think, no other reason than to force out the minority investor because that investor was complaining and demanding to change from being a passive investor to having a management role. That link to the decision provided by the article, http://cc.ashbaughbeal.enginestaging.com/wp-content/uploads/sites/2/2010/09/819238_opn.pdf (if you trust the "enginestaging.com" domain), contains the following on page eight: I am not an attorney, so take this with a grain of salt, but I don't see this necessarily leading any forced out shareholder to "end with 0" or being obviously underpaid, as there appears to be a process for contesting the fair value.
If you don't like your cash out price, exercise your appraisal rights or sue the company. Of course if all you're losing is a fraction of a share, it's nearly always going to be too expensive to defend your rights than fight it on economics grounds. Not that it's the case that OP talked about, but I have seen some companies squeeze out their minority shareholders for a lowball price using a reverse split mechanism. You have fewer protections against this than you do with a merger for example, although the exact details depend on the state law where the company is based.
Thank you for your responses and added articles. I have more sources -so it is not just a case of partners sueing- so I will read first what updated law says and/or wait for a friendly deal with company/underwriter. I believe in fairness.