Grocery e-Commerce as a temporary change…
As a global pandemic and quarantine swept the world, consumers fled to grocery stores to stock up on essentials. Then ensued the shortage of items like toilet paper and hand sanitizer, and purchases of items such as fresh produce spiked by as much as 600%. As quarantine regulations went into effect, shoppers started opting for online grocery orders rather than going into the physical stores, creating a surge in grocery e-commerce. So much so that Instacart—the San Francisco-based grocery delivery service—had a sales increase of 55% in the month of May; a 30% increase from February that has allowed it to secure a $225 million in new funding to scale its operations.
The future of grocery e-commerce
So, what does this translate to in the grocery e-commerce landscape? As it turns out, about $38 billion. In 2019, online grocery orders increased by 22% and accounted for about 2.6% of U.S. food and beverage retail sales. But recent figures show that in light of the pandemic and consumer purchase shifts, these same orders are expected to surge to about 40% in 2020, bringing the projected growth in online grocery purchases to 3.5%—or roughly $38 billion.
Without a doubt, the impacts of COVID-19 have been felt across all sectors of retail, and consumer shopping habits are changing. In fact, whether we look at actual online grocery orders or plans to place online grocery orders, both figures have more than doubled in the last two years.
|Year||Purchased groceries online in the last 12 months||Planned to purchase groceries online in the next 12 months|
But what about grocery returns?
Remember those purchase spikes we talked about earlier? Well, considering the fact that grocery stores remained open and supplied with most items during the quarantine, how much of that over purchasing was necessary, and how much of it will be returned? On the other side of the purchase boom, there is typically a return boom. Over the past several months, items of various types have sold out, such as hygiene products, canned, and bottled goods. So, with a surge in grocery e-commerce fueled by a global pandemic, what will happen with the items that consumers over-purchased and no longer need?
As quarantine restrictions ease, different retailers have updated their return policies. Costco is not accepting returns of toilet paper, paper towels, sanitizing wipes, water, rice, or disinfecting spray. CVS on the other hand, has stated that “Most new, unopened items purchased from CVS Pharmacy or CVS.com can be returned to any CVS Pharmacy store within 60 days.” Walmart is restricting returns of essential goods, but is also recommending that consumers start a return process online—for products in any category. And grocers in Michigan are now accepting can and bottle returns.
What Can Grocers Do?
In a world where a global pandemic has created a pathway for grocery e-commerce to thrive, grocers need a liquidation solution to sell overstock items that can no longer be sold in grocery stores that extends beyond their omnichannel strategies. That’s where B-Stock can help. We provide retailers a private, online marketplace to auction off their returned and overstock merchandise to a large network of vetted business buyers from all over the globe. It’s why nine of the top 10 U.S. retailers are currently using our solution to offload their excess inventory—regardless of product type.
If you’re ready to tap into an e-commerce solution for your excess grocery products, request a demo.
FAQs for First-Time Resellers
How can I start my reselling business online?
Reselling liquidation lots can be a fun, fascinating, and profitable business. Many people would like to get in on such a venture but don’t know where to start.
The first and most important step is to determine what your niche will be. “Reselling liquidations” is far too broad for a brand new business, so you’ll want to narrow it down a bit. You may choose to resell items in a particular category such as clothing, electronics, or home goods. Some prefer to instead target resales from a specific retailer. If you choose to pursue this route, it’s best to select a retailer with a focus such as a home goods store or an electronics seller, rather than a broader catalog of general merchandise like Amazon or Walmart.
Once you’ve determined your niche, it’s important to research it thoroughly. Familiarize yourself with the types of products you’ll be selling and the current trends surrounding them. Find a good source of information on the direction your products are heading so you can anticipate coming changes in your market.
Finally, you’ll want to figure out where and how you will resell the items. Will you make them available online or have a physical presence in your town? There are a number of websites that are excellent for resellers such as eBay and Amazon. For local businesses, it may be best to start out with a stall at a local flea market or consignment mall.
When is the best time to start my reselling business?
While liquidation lots are available year-round, and it’s possible to start a resale business at any time of your choosing, it’s widely accepted that January is the best month for liquidation auctions. This is because retailers have a huge number of post-holiday season returns to process and many of these are still brand new products in perfect condition. Additionally, many retailers are liquidating merchandise they only carry on a seasonal basis, as gifts for the holiday season. For this reason, you’ll find the best selection of inventory, and often the highest discounts too, because of the sheer number of auctions going on after the first of the year.
What products can I sell to make money?
The truth is, almost any nonperishable good that is for sale in a retail store can also be found in a liquidation auction. Here is a list of some of the most common categories:
- Apparel, Footwear & Accessories
- Automotive Supplies
- Books, Movies & Music
- Cell Phones
- Computer, Equipment & Software
- Consumer Electronics
- Health & Beauty
- Home & Garden
- Industrial Equipment & Building
- Jewelry & Watches
- Mixed Lots
- Office Supplies
- Toys, Kids & Baby
What retailers should I consider purchasing returns from?
The good news is that there are dozens of top retailers and manufacturers who sell returns and other products through liquidation auctions. One good approach is to focus on a retailer you shop regularly. This way you will likely be more familiar with the types of products they carry and better able to gauge the market. Some of the most popular include:
- Best Buy
- GE Appliances
- Eddie Bauer
- JC Penney
- Sam’s Club
- Nordstrom Rack
- The Home Depot
Where can I purchase goods to resell on my own?
The B-Stock network is an excellent place to start. Our sourcing network features liquidations from dozens of leading manufacturers and retailers. We offer returns, liquidations, and overstock auctions as well. With our large selection, you’re sure to find plenty of auction lots to fit your inventory needs and your business budget. And since our network is so vast, you only need to apply for a reseller account once to gain access to auctions of all sizes and price points, located in warehouses across the country.
How much money can you make reselling goods online?
Some seem to believe that reselling auctioned goods online is a quick and easy way to make a buck. While it’s true that this can be a lucrative business, it can also be a lot of hard work, so it’s best to go into it with a good understanding of the process and its requirements. The best way to maximize your profits is to do plenty of research before you begin. Understanding your market, your target buyers, reselling requirements, and the sites you’ll be selling on is key. The more information you gather about your business before you begin, the better prepared you will be and the more likely you are to make reselling a success.
B-Stock works with nine of the top 10 U.S. retailers to help resell their returns, overstock, and other liquidation merchandise. We have dozens of private retailer marketplaces across different categories and conditions to suit your business inventory needs.
Investing in Equity for Beginners and Small Investors
How should a beginner or a small investor invest in equity?
The answer widely available and promoted widely is ‘SIP karo’-invest in mutual funds through SIP.
Even if you have some lumpsum to invest chances are that you will be told “don’t take the risk of investing in one go, SIP karo”.
Some will suggest a few funds with the “best past returns”. And then quickly you will be told how simple it is to invest in MF, “App download karo aur invest karo”
For some reason, beginners and small investors are expected to be satisfied with these answers-answers that may be right if all you can invest in a few thousand every month but not if your lumpsum and monthly savings are a more than that.
Yes, it has become very easy to buy MF but it is not easy to invest in it successfully.
Challenges faces by new investors
- May want to invest in stocks but most advice is only on mutual funds.
- Need to deploy their lumpsum savings but most advice is on SIP in mutual funds.
- Everyone agrees that selecting mutual funds based on past performance is inadequate and incorrect but most advice is based on past performance.
- Market is ever-changing but most advice is one- time
- Selection and Portfolio management is not simple enough
- Don’t really learn how to invest in equity
There is a need for an investing solution beyond SIP in MF for beginners and small investors. So we decided to design a solution that addresses all the above challenges faced by them.
For whom: If your total investment i.e the lumpsum + 12 times the monthly savings you want to invest in between 1 to 5 lacs you need a better solution to investing than SIP in MF. Read on
What do you need? You need to invest your lumpsum and monthly savings in Stocks, Mutual and Index funds. You need to manage this portfolio i.e. buy, sell or hold these as the market goes through it ups and downs. And you need to do this with some understanding of the process and not just act blindly on someone’s recommendations.
Stocks, Mutual and Index Funds all have their advantages and with proper guidance, you can take advantage of all of them.
What are the benefits of investing in Stocks?
Investing in individual stocks gives you a higher level of control over your portfolio, where you can choose your allocation based on a specific industry and quickly exit once you earn a sizable profit. Since you are in control, there are no additional overheads like fund manager fees. Finally, your decisions are not impacted by external factors as is the case in a Mutual Fund, eg redemption pressure, large inflows, fund manager exit, etc.
What are the benefits of investing in mutual funds?
Mutual funds help you diversify easily with a very small investment. A typical MF holds around 50 stocks in its portfolio, thus presenting lesser risks if one stock was to perform poorly. A dedicated fund manager who understands the Indian markets actively monitors and oversees the fund so that inexperienced investors don’t have to sweat it. MFs make it easy for beginner investors in India to follow a disciplined way of investing through.
What are the benefits of investing in index funds?
An Index Fund is a mutual fund where the portfolio of stocks is not actively selected by a fund manager but is a replica of the Index eg the Nifty 50 Index Funds’ portfolio matches that of Nifty 50. Mutual funds are called actively managed funds while investing in index funds is called Passive investing. The advantage of an Index fund is that its portfolio is predictable and it comes at a lower cost. So you get the benefit of diversification at a lower cost. However, the decision to invest in Index funds is similar to any mutual fund.
How do you invest in Stocks, Mutual and Index funds?
The answer is Think Portfolio! Ensure you have a diversified portfolio of strong companies and MFs.
But how do you select the few for your portfolio from amongst a larger set of strong companies and MFs. The answer is you select the ones which have an attractive upside potential over the next 3 years.
This prevents you from buying at expensive prices-thus avoiding the risk of mediocre returns and sharp fall in case the market/stock corrects for whatever reasons.
Why 3 years? So you choose like an investor-expect growth from the company’s performance and not the market price movement (which is a trader’s mindset) which is a bonus when it happens.
How to implement this?
It is not feasible for a beginner to screen stocks and MFs and select the ones to invest in. This is the job of your advisor. However, you should not be expected to follow someone’s advice blindly. What you need is to understand the process followed in making the recommendations and enough transparency to know that due process has been followed. This will enable you to invest confidently and stay invested.
When we search for a solution based on all the above- advice to build a portfolio of stocks, mutual and index funds to invest both lumpsum and monthly savings and provided transparently; we found that there is nothing available for beginners and small investors. So we decided to build one
With PRO you will be able to invest
- In a portfolio of strong company stocks with an attractive upside potential
- Lumpsum in a set of funds with attractive upside potential
- SIP in a set of funds with different investment styles
You have the flexibility to choose where you wish to invest and how much. We recommend investing your lumpsum equally in the stock portfolio and in MFs for better returns and a diversified portfolio.
The PRO Dashboard is designed to give you the most important decision related information right there
- For stocks, you can see how it is rated on its 10-year performance, Future Prospects, and its Upside Potential.
- For MFs you can see its Investing Style (Momentum, Quality, Value, Small Cap), Fund Quality (as compared to other funds) and it Upside Potential
An analyst note explains the rationale for the recommendation in brief. And you will be able to get further details when you click the stock or fund name.
You can also do the stock transactions from the PRO Dashboard.
If your trading account is either ICICI Direct or available on the smallcase gateway (Zerodha, HDFC Sec, IIFL, Edelweiss, 5 Paise, and Alice Blue) you can safely and conveniently complete the transaction using the APIs on the PRO Dashboard.
This convenience enables you to SIP in the stock portfolio if you do not wish to SIP in MFs.
Finally, when you transact from the PRO Dashboard your portfolio is automatically updated in the Moneyworks4me Portfolio Manager (which has many benefits).
Visit the site to understand PRO better and see a video of how simple it is to use.
Click here to view our plans and sign up.
Need help on Investing? And more….Puchho Befikar
The post Investing in Equity for Beginners and Small Investors appeared first on Investment Shastra.
What does a reverse stock split mean for investors?
A reverse stock split can benefit a corporation and an investor. This TradingSim article will explain what that action is. In addition, this article will also explain how reverse splits from large corporations benefit new investors. Also, this article helps investors to rebalance their portfolios in this bear market. This article can also help investors improve their trading strategies.
What is a reverse stock split?
A reverse split is a corporation’s decision to reduce the number of its existing shares. With that action, a company splits its stock into fewer shares. Because companies sell fewer shares to investors, they enable certain actions. When a corporation has reverse stock splits, companies make their shares more valuable.
Why do companies reduce shares to sell investors?
When a corporation has a reverse stock split, there are many reasons for that decision. When a corporation’s stock falls, it’s in danger of a delistment from the New York Stock Exchange. If there’s a delistment, a stock becomes a penny stock. To avoid that fate, a company makes fewer shares available to raise the share price. Stockholders vote to approve the measure.
While corporations have reverse stock splits because of negative reasons, there are positive reasons as well. If a corporation plans to have a spinoff company, a company can reverse split its shares to increase share price. Then, a corporation can spin off into another company to gain a higher share price.
What different kinds of reverse splits exist?
Just as stocks have different prices, some reverse stock splits have different ratios. For example, a company has a 100:1 reverse stock split. In that case, every 100 shares a shareholder has converted to one share.
In one example, an investor can have 100 shares of a company at $10 a share. After a reverse stock split, every 100 shares changes to one share.
With 100,000 shares before the stock split, the market capitalization is $1,000,000. With a 100:1 split, there are now 100 outstanding shares.
The calculation is as follows:
Each share is now worth $1,000.
Does a reverse stock split affect a company’s worth?
While a reverse stock split may change an investor’s perception of a company, it doesn’t affect a company’s overall value.
Ryan Sterling is the founder of Future You Wealth in Manhattan. He noted that a company’s reverse stock split changes “are cosmetic. “They don’t say anything about the fundamentals,” added Sterling.
“Any enthusiasm you feel from a stock split, I would take with a whole lot of caution. When you talk about money in the stock market, the biggest eroder of wealth over time is human emotions,” said Sterling.
How is a reverse stock split different from a stock split?
While a reverse split means fewer shares for investors, a “regular” stock split does just the opposite. When a company takes that action, they make more shares available to investors. In a recent example, Apple recently announced it would have a stock split in August. Through a statement, the tech company made the decision to “make the stock more affordable to a broader base of investors”.
In Apple’s 4- for- 1 stock split, four shares sell for the price of one. As a result, if investors buy Apple stock at $ 400 a share. In this new 4-for-1 split, investors can buy one share for about $100.
Is a reverse stock split bad for investors?
When corporations have reverse stock splits, they sometimes have negative consequences. Financial expert Bill Matthews had one example of a company’s stock falling after having a reverse stock split.
“I was talking with a friend about a stock that he had bought at $1 per share. Shortly after he bought, the price fell to $0.50. A few months later, he received notice that the company was planning to implement a 1-for-10 reverse stock split. He was wondering if that reverse stock split was a good or bad thing,” said Matthews.
“According to the company’s press release, the reverse stock split of 1 for 10 would bring the stock price up to $5 per share, and that would prevent the stock from being delisted from Nasdaq. I ran into my friend a few weeks ago and asked about the stock. The stock, which was selling at $5.00 after the reverse, is now selling at $1.25 and he is down 88%,” added Matthews.
“In this case, the stock moving from $0.50 to $5.00 overnight was just an accounting ploy. The company still had very shaky fundamentals. Savvy institutional investors won’t invest in the stock just because its price suddenly soared, and it will have a hard time raising capital if its balance sheet is poor,” said Matthews.
“Shorters, who follow reverse stock splits and target those stocks, began to put pressure on the stock price, sending it tumbling. As selling pushed the price downward, other investors panicked and sold, causing the price to plummet even lower. As my friend discovered, a reverse stock split is normally not good news for shareholders,” added Matthews.
What should investors do when a company has a reverse stock split?
When a corporation has a reverse stock split, Matthews advises investors to review a company’s balance sheet if it reduces available shares.
“If a stock in your portfolio announces a reverse stock split, take a good look,” said Matthews.
Matthews notes that if a corporation’s “fundamentals aren’t healthy, you might be better selling your shares. If you really like the stock, chances are good that you can buy back those shares at a much lower price several months down the road.”
However, if a company’s balance sheet and past earnings reports are strong, Matthews notes that investors should hold those stocks.
How does Apple stock split affect investors?
As a result of Apple’s split stock decision, many financial experts see it as a good sign. Caleb Silver is editor-in-chief of Investopedia. After Apple’s announcement, he believes that Apple’s decision will attract more investors to its stock.
“For popular stocks like Apple, the lower share price makes it attractive to investors who couldn’t afford higher share prices but want to own a piece of the company. Stock splits are seen as a sign of confidence from a company,” said Silver.
In addition, he added that Apple’s stock split is “considered a response to more demand for its shares from investors.”
Sterling doesn’t think that Apple’s stock won’t be affected by the stock split. He believes it “effectively increases demand for people who don’t understand fractional shares,” Sterling said. “If anything, it causes more volatility in the stock.”
Will Apple’s stock split impact the stock market?
While Apple’s stock split is gaining attention, financial experts say it won’t change the company’s value. Max Gokhman is head of asset allocation at Pacific Life Fund Advisors. He doesn’t think that the stock splits will affect its share price.
“To be crystal clear, however, and as proven by grade school algebra, stock splits have no impact on the value of a company,” said Gokhman.
Financial editor Ric Edelman also thinks that Apple’s value won’t be affected by the recent stock split.
“This is not a financial event and has no economy implications or bearing on the value of the investment or the outlook for Apple as a business. It’s a non-event,” said Edelman.
“This is a huge event from a psychological perspective. That’s the reason companies engage in stock splits — they know it plays on the emotions of investors,” added Edelman.
Edelman also advised investors to ignore Apple’s stock split and invest in other assets.
“You should ignore this and instead invest in diversified stock mutual funds,” said Edelman.
Rite Aid stock rises after reverse stock split
Rite Aid (NYSE:RAD) is a company that had a reverse stock split in 2019. The pharmacy chain made the decision to avoid a delisting from the New York Stock Exchange. Rite Aid’s stock was in danger of falling below $1 before the reduction of available shares.
As a result, Rite Aid had a 1-for-20 reverse stock split. Every 20 shares of Rite Aid stock is converted into one share. The share will be 20 times the original price. While the stock briefly rebounded after the split, the coronavirus crisis caused Rite Aid shares to increase.
In addition to being part of a White House COVID-19 response group, Rite Aid is expanding its services. Many pharmacy locations will also be coronavirus testing centers.
While Rite Aid will expand services, the company noted in a statement that its “current supply of generic medications is presently sufficient and the company does not anticipate any significant near-term supply chain disruptions that will affect its ability to fill prescriptions.”
Rite Aid’s Q1 2020 earnings rise above expectations after reverse stock split
Rite Aid’s Q1 2020 earnings report exceeded Wall Street expectations. In the last quarter, revenue was $6.03 billion. That’s an increase from $5.37 billion in Q1 2019. Rite-Aid’s CEO, Heyward Donigan, spoke about the positive results.
“There are certainly challenges brought about by COVID-19, including the decline in acute prescriptions and increased costs incurred to assure the safety of our associates and customers. No matter the challenge, we can execute our strategy and deliver day-to-day operational excellence in the face of a pandemic,” said Donigan.
“I am amazed by the passion and spirit of our more than 50,000 associates, who have come to work every day driven by a desire to help customers stay healthy and demonstrating the essential role of pharmacy in our communities,” added Donigan.
Donigan also spoke about the importance of Rite-Aid’s pharmacists and new initiatives during the COVID-19 era.
“Thanks to their hard work, the fundamentals of our business are strong, and we are right on track with the launch of our new RxEvolution strategy. I am excited to continue this important work as we look to become a leading mid-market PBM, unlock the value of our pharmacists and revitalize our retail and digital experiences,” said Donigan.
Rite Aid’s reverse stock split ultimately brought the corporation from the brink of bankruptcy.
Booking Holdings survives reverse stock split
Bookings Holdings(NASDAQ:BKNG) is another company that survived after a reverse stock split. When the corporation was still called Priceline, it made a decision to have a 1-for-6 split in 2003.
COVID-19 affects Booking Holdings Q1 2020 earnings
While the online trip booking company rebounded after its reverse stock split, coronavirus disrupted that growth. In its Q1 2020 earnings report, Glenn D. Fogel spoke about Booking Holdings’ disappointing results.
“Revenue declined 84% versus last year, and we recorded an adjusted EBITDA[ earnings before interest, taxes, depreciation, and amortization] loss of $376 million, the first time we have produced a quarterly EBITDA loss since 2001. We witnessed the greatest negative impact from the virus in April as newly booked room nights in that month declined over 85% year-over-year,” said Fogel.
While travel declined during the worldwide quarantine, Fogel noted that Booking Holdings’ revenue improved slightly. He noted that trip bookings rose after the economy opened up again in late spring.
“After April, room night trends have steadily improved. The improved booking trends were primarily driven by domestic travel, with international trends seeing much more limited improvement,” said Fogel.
“While almost all of our global markets showed improvement through the quarter, Europe and the United States had the highest contribution to the improved domestic booking trends,” added Fogel.
Some financial experts bullish on Booking Holdings after reverse stock split
When the U.S. State Department lifted global restrictions, Booking Holdings stock increased 1.5%. Steve Chiavarone is a portfolio manager and equity strategist and vice president at Federated Hermes. He noted that the Booking Holdings stock bump may not last because Americans are still afraid or unable to travel.
“But you still have restrictions on Americans coming in, and I think ultimately, people aren’t just staying home because of mandates. They’re staying home because they’re worried about their health,” said Chiavarone.
“I think for a lot of reasons, you’re still going to see travel levels down. I think you’re still going to see a preference for domestic travel. But, hey, incrementally, the idea that there are parts of the world that have gotten coronavirus under control enough that we can start to lift restrictions, that’s a good thing,” added Chiavarone.
Some financial experts are bearish on Booking Hearings stock
While some analysts are bearish on Booking Holdings’ stock, Broyhill Asset Management is bullish on the company’s stock. In a letter to clients, Broyhill Asset Management thinks that Booking Holdings will survive the coronavirus-caused decline in trip bookings.
“During the quarter, we also built a position in Bookings (BKNG), which we had been watching long before the crisis began. For the past three years, the stock has been under pressure due increasing concerns about the company’s competitive positioning—in relation to both hotel loyalty programs and Google’s search engine,” said Broyhill.
“And although Bookings will likely suffer in the short term, its more entrenched European business, combined with its strong balance sheet, should make it among the best-positioned companies throughout the travel sector,” added Broyhill.
While Booking Holdings has difficulty now, the reverse stock split ultimately benefited the company.
Grow Capital reduces available shares
Grow Capital(OTCQB:GRWC) is a corporation that incubates fintech companies. The company recently announced that it’s implementing a 1-for-20 reverse stock split.
The company is implementing the reverse stock split to increase its trading price to $4.00. Once the stock price reaches that threshold, it will meet NASDAQ’s required bid price. Grow’s interim CEO Terry Kennedy spoke about the changes in a statement.
“This reverse split will help GRWC normalize trading and better align with our business activity. Our subsidiary is growing and we have new acquisitions on the horizon. Issuing this reverse-split is expected to raise our per-share price and allow for better long-term planning,” said Kennedy.
Grow’s board president James Olson also spoke about the reverse stock split.
“The Board believes it is in the best interests of GRWC and the stockholders to implement the Reverse Stock Split to reduce the number of our issued and outstanding shares of common stock”, said Olson.
Olson spoke about the reverse stock split “thereby increasing the number of shares of common stock available for issuance. We believe it is likely to increase the market price as fewer shares will be outstanding.”
He also noted that “the expected increased market price will encourage interest in the common stock.”
Grow Capital is another company hoping to increase its share price by reducing available shares to investors.
Xerox has reverse stock split
In addition to small companies like Grow Capital, established corporations like Xerox(NYSE:XRX) had a reverse stock split in 2017. Xerox spoke about the 1-for-4 stock split in a statement.
“As a result of the reverse stock split, every four shares of Xerox common stock issued and outstanding or held as treasury shares were automatically combined and reclassified into one share of Xerox common stock. The reverse stock split also affected all outstanding Xerox equity awards and outstanding convertible securities,” said Xerox.
What did financial experts say about Xerox’s stock split?
When Xerox announced its reverse stock split, Ian Wyatt, editor of High Yield Wealth, spoke about the decision.
“So why did Xerox bother with a reverse stock split if investor wealth remains unchanged? Visibility is the answer. Many institutional investors—mutual funds in particular—ignore stocks priced in single digits. Many investment firms ignore these stocks as well. Xerox is trying to raise its profile with its reverse-stock split,” said Wyatt.
Wyatt noted that he and other experts were unsure if the decision would impact Xerox stock.
“We’re agnostic on the reverse stock split. It could raise Xerox’s standing among institutional investors and research analysts. It could also lower Xerox’s standing among other investors. Some investors are repelled by reverse stock split. They view a reverse stock split as an insincere strategy for raising the share price. Financial performance ultimately determines value and price in the long run.”
Xerox revenue falls during COVID-19
While Xerox stock rebounded after the stock split initially, shares tumbled during the coronavirus crisis. The corporation’s Q2 2020 revenue fell to $1.465 billion from $2.263 billion.
“The global COVID-19 pandemic crisis significantly impacted our second quarter 2020 revenues due to business closures and office building capacity restrictions that impacted our customers’ purchasing decisions and caused lower printing volumes on our devices,” said Xerox in a statement.
Xerox is still a viable company after its stock split, but has suffered like man companies in this current economy.
AIG rebounds after reverse stock split
AIG( NYSE:AIG) stock rebounded after collapsing during the 2008 financial crisis. The insurance company tried to recover by having a 1-for-20 reverse stock split.
Cathy Seifert is an insurance analyst with Standard & Poor’s Equity Research. She noted that AIG’s stock split was more about easing investors’ worries than about its bottom line.
“Market psychology probably has something to do with this. The underlying fundamentals haven’t changed but the mechanics have,” said Seifert.
AIG another victim of COVID-19 crisis
Just as with Xerox, AIG’s revenue dropped during the coronavirus crisis.
AIG spoke about the results in a statement.
“Overall, AIG reported adjusted pre-tax income of $803 million and adjusted after-tax income of $571 million or $0.66 per diluted share, compared to $1 — compared to $1.3 billion or $1.43 per share in the second quarter of 2019. The key drivers of the year-over-year reduction were higher catastrophe losses from COVID and civil unrest, along with lower net investment income,” said AIG.
While AIG persevered after 2009, the company’s still struggling during the current volatile economy.
E-trade thrives after reverse stock split
E-Trade( NASDAQ:ETFC) approved a 1-for-10 reverse stock split in 2010. Since then, Etrade stock soared as the trading firm added customers during the COVID-19-caused shutdown. E-Trade’s CEO, Chad Turner, spoke about the company’s positive results.
“We delivered strong financial results on top of continued record-setting operating metrics,” said Chad Turner, Chief Financial Officer. “We generated our highest period ever of revenue from trading-related activity, which more than offset the quarter-over-quarter pressure on net interest income, given the Fed’s recent rate cuts to near zero.
“While we remain prudent on managing expenses as we navigate this low interest rate environment, we continue to opportunistically invest in sales and marketing to maintain the tremendous momentum in growth of accounts, assets, and deposits amid an environment that is particularly ripe for franchise growth,” said Turner.
Turner also spoke about how the increase in traders caused a growth in assets.
“Furthermore, the blistering pace of account and asset growth continued in the second quarter, with $13.6 billion in net new retail assets, and 327,000 net new retail accounts, bringing our year-to-date retail asset flows to $31.9 billion and account growth to 656,000,” added Turner.
E-Trade stock soared after its successful reverse stock split.
Motorola struggles after reverse stock split
Motorola( NYSE:MSI) had a 1-for-7 reverse stock split in 2010 before split into two corporations: Motorola Solutions and Motorola Mobility. The company spoke about the split in a statement.
“Today’s announcement marks another important milestone toward the upcoming separation that is expected to benefit Motorola, its stockholders, as well as each company’s respective customers and employees. We look forward to taking advantage of the opportunities before us as we begin the new year as two independent, publicly traded companies,” said Motorola.
Motorola suffers during global pandemic
Even though the split helped the company after the decline of its Razr phones, the COVID-19 crisis hurt Motorola as well. In its latest Q2 2020 report, the company spoke about its worse-than-expected earnings.
“Q2 results included revenue of $1.6 billion, down 13% from a year ago, including $40 million of revenue from acquisitions and $30 million of currency headwinds. GAAP operating earnings of $218 million and operating margins of 13.5% compared to 18.8% in the year-ago quarter,” said Motorola in a statement.
Despite its reverse stock split, Motorola’s stock stumbled during the COVID-19 crisis.
AT&T profits rise after reverse stock split
AT&T (NYSE:T) stock remained stable after its reverse stock split in 2002. In that split, the corporation had a massive 24,875 for 50,000 stock split.
Since that stock split, AT&T stock rose and still had a positive Q2 2020 earnings report. CEO John Stankey spoke about the results.
“Our core subscription businesses proved to be resilient in the face of the economic downturn. Our mobility and business wire line segments performed well, and we grew EBITDA[ earnings before interest, taxation, depreciation, and amortization] margins in both areas. EBITDA of $7.8 billion was up year-over-year with both EBITDA margins and service margins expanding, and that’s inclusive of COVID impacts,” said Stankey.
He added that AT&T’s cash flow grew despite the pandemic.
“Cash flow was impressive even during the pandemic. Cash from operations came in at more than $12 billion and free cash flow came in at $7.6 billion,” said Stankey.
Stankey also noted that the quarantine helped AT&T’s cable and HBO Max streaming service grow as well.
“Our software-based entertainment businesses performed well. ATT TV subscriber growth in its first full quarter was better than we expected and it’s our highest performing video product with customer satisfaction, double the level of our legacy TV services,” added Stankey.
AT&T stock and business division rebounded and increased after its reverse stock split almost 20 years ago.
Citigroup (NYSE:C) had a 10-for-1 reverse stock split in 2013. During the split, some shareholders disapproved of the split. One shareholder commented on the split at the time.
“You guys know what the price of the stock is. It is the same price when we did the reverse split. This stock has to reach $600 for me to break even. Bring it down to $4.65 and then maybe it can climb back up to $60,” said the shareholder.
CEO Michael Corbat spoke about the stockholders’ concerns.
“This reverse stock split wasn’t done to engineer the stock price. It was done to reduce volatility and to get shareholders out of the stock who were using it as a trading vehicle, ” said Corbat.
Citigroup has better-than-expected earnings after reverse stock split
Despite the coronavirus crisis, Citigroup exceeded Wall Street expectations. Corbat spoke about the Q2 2020 results.
“While credit costs weighed down our net income, our overall business performance was strong during the quarter, and we have been able to navigate the COVID-19 pandemic reasonably well. The Institutional Clients Group had an exceptional quarter, marked by an increase in Fixed Income of 68%. Global Consumer Banking revenues were down as spending slowed significantly due to the pandemic,” said Corbat.
“We entered this crisis from a position of strength. During the quarter, our regulatory capital increased and our CET1 [common equity tier one capital] ratio improved to 11.5%, comfortably above our new regulatory minimum of 10%. We continued to add to our substantial levels of liquidity and our balance sheet has plenty of capacity to serve our clients,” added Corbat.
Corbat also spoke about how Citigroup was prepared for more volatility in the future.
“With a sharp emphasis on risk management, we are prepared for a variety of scenarios and will continue to operate our institution prudently given this unprecedented situation,” said Corbat.
Citigroup stock flourished after its reverse stock split and help from the Federal Reserve.
Aurora Cannabis latest company to have reverse stock split
In a more current example of a stock split, Aurora Cannabis (NYSE:ACB) is implementing a 1-for-12 reverse stock split. The corporation will reduce its available shares to investors from 1.3 billion to roughly 110 million.
Despite the boom in pot sales during the worldwide quarantine, the marijuana company’s shares have plummeted. Aurora explained its decision in a statement.
“The company intends to use a portion of this available capacity to provide further balance sheet strength and preserve flexibility given macroeconomic uncertainty caused by COVID-19,” said Aurora in a statement.
What do financial experts say about Aurora Cannabis’ reverse stock split?
In response to the announcement, Innovation Shares managing director Matt Markiewicz said that Aurora had no choice but to implement the reverse stock split. Aurora stock plunged to 69 cents a share. With that disappointing share price, the stock’s in danger of being delisted from the New York Stock Exchange (NYSE).
“They had to do this to stay compliant with NYSE rules. They can’t jeopardize the U.S. because of the large shareholder base here. There’s no way the company would risk cutting that conduit,” said Markiewicz.
Jefferies analyst Owen Bennett believes that the reverse stock split will hurt investors’ confidence in the cannabis company’s stock.
“Today’s announcement of a further [at-the-market program], alongside language that suggests [how] this will be used, will be a blow to sentiment,” wrote Bennett in a note to clients.
In contrast, Cowen analyst Vivien Azer notes that Aurora Cannabis’ positive cash flow can help its reverse stock split. However, she said that she had concerns about its overall balance sheet.
She noted that the cash flow is “a positive (particularly in the current environment), but we[Cowen] continue to have concerns on the balance sheet.”
Aurora has positive Q3 2020 earnings
Despite the concerns about Aurora’s reverse stock split, the company had a positive and negative Q3 2020 earnings report. While Aurora still hasn’t turned a profit, the company had an 18% increase in revenue to $78.4 million. CEO Michael Singer spoke about the corporation’s results.
“I am incredibly proud of the Aurora team for working through these challenging times in order to maintain uninterrupted operations at all of our production facilities and ensure we continue to meet the needs of our patients and consumers,” said Singer.
“I am also pleased that our third quarter 2020 financial results were in-line with our expectations, and that we remain firmly on track with the cost-savings and capex[capital expenditure] goals we detailed during our business transformation plan in February 2020,” added Singer.
“As outlined in our press release on Friday, revenue for Q1 2020 was $58.7 million with gross profit at $10.6 million. Both of these metrics are in line with the numbers previously estimated on the year-end call,” concluded Singer.
When Aurora Cannabis has a reverse stock split, it remains to be seen how it will impact investors.
Staffing 360 solutions has reverse stock split
Staffing 360 Solutions is another corporation that had a reverse stock split. The corporation’s stock will be sold in a 1-for-5 split. CEO Brendan Flood spoke about the shareholders’ decision in 2018.
“At a Special Meeting of Stockholders today, the stockholders of Staffing 360 Solutions voted by a large margin (over 74% of outstanding shares) to provide the Board with the authority to effect a reverse stock split at a ratio in the range of 1-for-2 to 1-for-10, such ratio to be determined by the Company’s Board of Directors. After careful consideration, the Board determined the appropriate reverse stock split to be a ratio of 1-for-5,” said Flood.
Staffing 360 Solutions Q1 2020 results mixed
After its reverse stock split, Staffing 360 Solutions had a mixed Q1 2020 revenue report.
While the corporation’s revenue was down, it was still in line with Wall Street expectations. Flood spoke about the Q1 2020 results.
As outlined in our press release on Friday, revenue for Q1 2020 was $58.7 million with gross profit at $10.6 million. Both of these metrics are in line with the numbers previously estimated on the year-end call.
Principal accounting officer Sharnika Viswakula spoke about the results as well.
“For the first quarter of 2020, revenue of $58.7 million reflects a decrease of 20.5% over the prior year of $73.8 million,” said Viswakula.
Staffing 360 Solutions has had mixed results since its reverse stock split.
Reverse stock splits affect investors in may different ways
In reverse stock splits, many corporations have been impacted in many ways. For investors, there are different results that can affect their ability to buy shares of a company’s stock and profit after the stock splits.
If investors want more information about reverse stock splits and how they affect their portfolios, they can practice trading on TradingSim. With research and simulated trades, investors can find the best stocks that can persevere after reverse stock splits.
The post What does a reverse stock split mean for investors? appeared first on – Tradingsim.
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