Single-Digit Stocks

Ipreo’s broad reach and trusted relationships with clients and contacts across all aspects of the financial community allows for unique access and valuable insight into a wide range of different topics. Occasionally we publish our findings in a Hot Topic Summary Report, such as this recent one about what makes a great IR program.

Recently, we’ve been curious about the industry’s thoughts on single-digit stocks:

Are stocks trading under $5 missing out on potential pools of capital? Would single-digit stocks be better served doing a reverse-split? We had some thoughts of our own, of course, but to get a real sense of how these stocks are perceived, we figured we’d ask the people who deal with questions like this every day.

So we reached out to select buy-side analysts and portfolio managers and got their feedback.

The responses varied but a number of investors thought that single digit stocks are missing out on potential pools of capital but did not believe doing a reverse-split was a solution as it does not create value for the company. Those investors suggested focusing on earnings growth, which will in turn raise the company’s profile and eventually raise the company’s stock price. One investor admitted to being in the minority opinion of liking reverse splits because it reduces the excessive daily volatility of that particular company’s stock price.

To see all of Ipreo’s findings, read our full Hot Topic Summary Report.