Almost 10%, or 47 companies, in the Standard & Poor's 500-stock index are trading under 5, and three under 1. That's why more companies are expected to do reverse stock splits-cosmetic maneuvers that make a stock appear more valuable by decreasing the number of shares outstanding. Time Warner Cable is slated to complete one by Mar. 12 as part of its separation from Time Warner, which should wrap up its own reverse split soon after. Bothrninvolve exchanging three shares for one, which will then trade at a higher price.rnIs a reverse split a signal to dump a stock? A 2008 study of 1,600 companies that did reverse splits found that the typical stock underperforms the broad market by 50% on a risk-adjusted basis during the three -year period after the action. "Reverse stock splits are a strong indicator the company is going to be a significant underper-former during the near future," says Jim Rosen-feld, co-author of the study and an associate professor of finance at Emory University's Goi-zueta Business School in Atlanta.
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