One reason is that it's difficult for short-sellers betting against a stock to borrow shares when the price is low, but it's easier once share prices return to more typical levels. What often happens, though, is that a stock that does a reverse split merely keeps falling in value. So an old $0.14 per share price should translate to new shares at $28 each.
Theoretically, after the reverse split is complete, the per-share price of the stock should be 200 times greater than it was previously. What that means is that for every 200 shares of Chesapeake stock investors currently own, they'll receive just a single share back. What Chesapeake's doingĬhesapeake announced that it would do a 1-for-200 reverse stock split. The move should ensure that Chesapeake stock will keep trading on the New York Stock Exchange for now, but it raises the more important question of whether it'll actually help the company regain its former stature as a leader in the industry. With the stock trading at just $0.14 per share recently, Chesapeake has decided to resort to what for many companies proves to be a last-gasp effort to stay financially viable: doing a reverse stock split.
That's had a huge impact on many exploration and production companies, pushing some of them to the brink of failure.Ĭhesapeake Energy ( CHKA.Q) has been one of the hardest hit stocks in the energy sector, with shares down more than 99.5% since late 2014. Oil and natural gas prices have fallen dramatically from much higher levels in the early 2010s, with crude in particular having fallen from triple-digit levels to just over $20 per barrel. The energy industry has gone through a lot of turmoil in recent years.
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