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Eugene Stark · Jan 30, 2013, 07:35 AM

I have 1000 shares of a stock they now tell me that the stock split back wards. And that I no longer have 1000 shares! Is this legal I have lost my faith in the stock market.

ebaines · Jan 30, 2013, 08:08 AM

A "backwards split" (acrtually called a "reverse split") is when they reissue shares giving you fewer shares than you originally had but at a higher market value. For example if you have 1000 shares of stock with a market value of $1/share and they do a 1:10 reverse split, you end up with 100 shares values at $10 each. Note the total value of your investment is unchanged, so you haven't lost anything through the reverse split. Is it legal? Absoultely - it happens all the time. But it only happens to stock that has fallen quite a bit from its highs, so it's easy to see why yuo've lost faith. I would suggest that your loss of faith in this one company may be warranted, but that doesn't mean that stocks in general are a bad investment.

ScottGem · Jan 30, 2013, 08:36 AM

As ebaines noted a reverse split cannot lose you money at the time of the split. The company has to issue the new shares at the current value. The value of the new shares may drop immediately afterward, but that is a problem with that stock, not the stock market in general.

samcreed · Jan 30, 2013, 10:40 AM

As the other two answers have said, it is legal for this to happen. The stock market, in general, has gained much since the last few years. Please be sure to have your investments diversified, in that some is in stocks and some in other areas... as the old saying goes, "don't put all your eggs in one basket"... Good luck.

PS; Make a call and see what your stock is now worth. Whoever informed you of the reverse split, will know what the value currently is and how many shares you now have.