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A stock can combine multiple shares, reducing the number of shares while increasing the share price.
Example: You have 100 shares of a stock worth $0.05 per share, the stock performs a 20:1 reverse split leaving you with 5 shares worth $1 per share. Your investment value was worth $5 both before and after the reverse split.
Occasionally, when a stock performs a reverse split, they will round up any post-split fractional shares to the nearest whole share.
Example: You have 1 share of a stock worth $0.05 per share, the stock performs a 20:1 reverse split leaving you with 0.05 shares worth $1 per share. Since the company is rounding up fractional shares, you actually receive a full share worth $1 per share. In this scenario, your investment value increased from $0.05 to $1. PROFIT 🚀
Each account you have will round your shares up separately.
Example: If you have a Webull cash/margin account, a Webull IRA, a Robinhood brokerage account, and a Robinhood IRA, and you buy 1 share in each account, you will receive 4 full shares after the reverse split (1 per account), increasing your profit to 4x what it would be with only 1 account. 💸
Note: Buying more shares on one account won't scale the strategy as 1/20 shares and 2/20 shares are both going to round up to 1 share post split.
Note: Some brokerages like E*TRADE have mandatory reorganization fees which makes the strategy not profitable at some brokerages.
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