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Boca Raton real estate company Strategic Capital Resources said it wanted "credibility." so it adopted a 200-to-1 reverse split of its common stock in May. Urecoats in Deerfield Beach did one earlier this year and got its shares off the counter and onto the American Stock Exchange. Now Marex in Miami is looking to save its national market listing using the same technique.
Locals Intraco, CyberCare, Automax, Universal Communications, Disease Sciences, Holiday RV Superstores and Florida Public Utilities all announced reverse splits in 2002. Nimbus postponed one in June.
Reverse stock splits, performed by companies hoping a higher stock price will make them look better and attract more investors, are on the rise in South Florida. The Business journal reported less than a half-dozen reverse splits in all of 2001. While the payoff for shareholders is usually nfl, some analysts believe such deals may keep smaller cap firms afloat - albeit, temporarily. They can also be a smokesccreen for bigger problems, they say.
Both Marex and Urecoats recently reversesplit their stock one for-10, leaving one-tenth as many shares outstanding. That means investors are holding 90 percent fewer shares that are 10 times more valuable. While the return for investors is the same, overall market confidence is usually buoyed - even if the stock price eventually tanks.
Strategic's Chairman and CEO David Miller told the BusinessJournal in May that his company adopted the reverse split because it believes the relatively low per-share market price of company common stock was less attractive to investors, and hurt the company's business plan.
"Many analysts will not or are not permitted to initiate coverage on any securities that trade below $5," said Miller. "In addition, certain investors view low-priced stock as unattractive or, as a matter of policy, are precluded from purchasing low-priced securities."
Miller said a $458,000 buyback of more than 2 million shares did not boost the share price as the company had hoped.
According to the Nasdaq, 32 stocks - 10 of which were tech companies - went through reverse splits between January and November 2000. However, 22 percent of those stocks slipped below $1 and into penny-stock status.
Last month, Business 2.0 writer David Futrelle reported that nationally-known Microstrategy and Palm were "trying their best...