Sirius XM Radio Inc (SIRI), Alcatel Lucent SA (ADR) (ALU): 3 Stocks That Should Go for a Reverse Split

Page 1 of 2

Well, that reverse split wasn’t so painful.

Jamba, Inc. (NASDAQ:JMBA) shares moved 14% higher last week after kicking off the week with a 1-for-5 reverse split.

Every five shares of the smoothie chain operator were replaced with a single share priced five times higher. The end result is that Jamba closed out the month of May at $2.99, or $14.95 after the reverse split kicked in after May 31′s close. It moved higher in four of the first five days of post-split trading to close out its first week at $17.

Reverse splits have negative connotations, and rightfully so. For every Jamba that executes one to boost its shares into a price that swaps speculators for institutional investors, there are countless fading companies going through reverse splits to maintain their exchange listings.

For every rising company going for a reverse split — and Jamba did hit a multiyear high before the move — there are too many desperate companies going this route in desperation.

With Jamba, Inc. (NASDAQ:JMBA)’s seemingly successful split, which company with a share price in the low single digits is a prime candidate for being the next successful reverse? Let’s check a few out.

Alcatel Lucent SA (ADR) (NYSE:ALU) — $1.84
Despite its tiny share price, Alcatel-Lucent did close at a 52-week high on Friday.

The global provider of products and services for the networking and communications industries may be losing money on flat revenue growth, but losses are narrowing. There’s also more to the flat top-line performance than meets the eye as reasonable growth in its networks and platforms businesses is offsetting double-digit declines in its optical networking operations. Alcatel Lucent SA (ADR) (NYSE:ALU) is also taking better bets, exiting or restructuring contracts where the cost structures aren’t fiscally prudent.

A shrewd move to raise more than $2 billion in new financing late last year should help it ride through upcoming debt repayment milestones until it returns to profitability as early as next year.

Sirius XM Radio Inc (NASDAQ:SIRI) — $3.46
Late last month, I made the unpopular argument that the top dog of satellite radio should follow Jamba into a reverse split, and I’m not backing down.

Sirius XM Radio Inc (NASDAQ:SIRI)Sirius XM Radio Inc (NASDAQ:SIRI) has been one of the market’s biggest winners over the past four years, but there is a problem with having nearly 7 billion shares outstanding. If Sirius XM were to join Jamba in the mid-teens, we would be talking about a market cap of $100 billion. That’s just not realistic given the media giant’s current business model.

Credit: Sirius XM Radio Inc (NASDAQ:SIRI)

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!