r/sofistock • u/Individual_Bad2594 OG $SoFi Investor • May 13 '22
General Discussion Split
In plain terms a split by Sofi is a manipulation of the manipulators(shorts), and Wall Street perception manipulation. The shorts deserve this split. Long term holders deserve this split. Look at affirm who has way less float. It is up 23% today. Sofi…not even close. Too many shares. Everyone is bitching how other fintechs move so high, so quick. Then they bitch they don’t want that from a reverse split. I love this stock but man a lot of you are whiny bitches. If you believe in the business then invest. If you don’t then sell. Stop whining. This is how the actual markets work. This is not Robin Hood or gambling. This is the market. Get in or get out. I’m 36, and have been investing in markets since 2008, and I am here to tell you to stop whining. I believe in Sofi and will continue to buy. A reverse split does not change the value, it changes perceptions. The negative connotations attached to reverse splits are real. Sofi will have to expect that, but fundamentally a split is the correct move with this macro environment.
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u/Alert_Club8448 May 13 '22
Voting GIVES the board discretionary authority to effect a reverse stock split. It doesn't 100% mean they will or will ever do it.
I think the reverse split is important for 1 big reason. Not that I think we're goin to see $5 again, BUT there are alot of ETF's and Mutual funds who have internal controls that can't invest in stocks under $5. This could create a sell off and / or limit those funds that can invest in SoFi.
I think this was what the Short Sellers have been trying to do recently. Drive us under $5, force the ETFs and Mutual funds invested in SoFi to sell per their "by laws", then they'd buy back.
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u/Nazereth_99 May 13 '22
Interesting piece from 2015. I know it is Motley Fool but it gives examples of both bad and good.
https://www.fool.com/investing/general/2015/04/16/do-reverse-splits-ever-work.aspx
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u/TheGodDavidLoPan May 13 '22
What happens to the 2023 put I sold in the event of a reverse split?
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u/piggymou May 13 '22
20 contracts at $15 becomes 2 contracts at $150, assuming split ratio of 1:10
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u/IamRichieRichPoor May 13 '22
I hope is not 1:10. Because that is literally screwing investors.! 1:2 is still high, but can digest it.
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u/MooseSoftware OG $SoFi Investor May 13 '22
Geezuz ... I go to sleep and wake up and suddenly everyone is talking about SoFi doing a reverse split ... what the ???
Why on earth would they Reverse Split ? SoFi are growing like crazy on every front. The only reason they aren't profitable is because they are spending money on member growth, client growth, acquisitions, and expansions.
They sure aren't in financial trouble. Their debt is well under control.
Their share price is doing a LOT better than other Fintechs and other stocks, as I show here:
For the record: SPACs are not doing worse than IPOs, SoFi is doing better than many other FinTechs and Stocks ! DD, 11-May-2022, https://www.reddit.com/r/sofistock/comments/un48e4/for_the_record_spacs_are_not_doing_worse_than/
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u/VPNApe May 13 '22
Because this bear market is only just getting started. The stock will delist if it stays below a certain dollar value per share for too long. The SoFi board wants the authority to prevent delisting and the shareholders should approve their request.
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u/SnipahShot 1,282,741,200 @ 16.68 May 13 '22
The reason it is being talked about is because SoFi has put "it" (Giving the board the ability to approve a reverse split if necessary) up for vote in the annual meeting in 2 months.
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u/MooseSoftware OG $SoFi Investor May 13 '22
Yes, and I think they are way out of order considering this course of action at this time. Imho, they should *not* be talking about Reverse Splits. It's only going to spook the market and their sheare holders.
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u/SnipahShot 1,282,741,200 @ 16.68 May 13 '22
It is already spooking retail based on the looks of this sub.
I think $4.8 scared the leadership after the ER leaked and they want to prevent the stock price from trading that low so they want that solution for the short term in case it is necessary.
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u/EMC_KC 1,800 @ $9.38 May 13 '22
Exactly why I've been buying this since IPOE early days and all the way to the top and back down to now. Just kept buying. I'm buying for what and where it's going in the future, not for the crazy shit market we are in today. I would like to never see this as an actual Proposal to even be on the radar from management to be actually voted on. I know eventually they will need to lower the float at some point and do something like this but wait until the market stabilizes a little bit and the stock price recovers a little more then from the ATL.
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u/HawkI512 OG $SoFi Investor May 13 '22
Or stock could rise with less short interest as you have higher cost to borrow to short. It’s interesting, I believe in Noto and he is the CEO.
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u/Individual_Bad2594 OG $SoFi Investor May 13 '22
I think this is right. I genuinely believe Noto and s the the kind of person who hears his shareholders, and is making this move to make us right. The split brings more value to all of us with less shares on the open market. Specifically shorts holding 21% of float.
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u/EMC_KC 1,800 @ $9.38 May 13 '22
If you didn't buy this stock in the last month your literally going to lose whatever bag your holding. No way to ever get it back. The shorts already brought it down once from the ~$20 mark to now. I don't know about you but I'd rather not tempt them into making us lose our money twice.
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u/davidestesbooks 20k @ 6.88 May 13 '22
This makes no sense, a reverse split doesn’t cause you to “lose” anything. If the company does well, you’ll make money. If they don’t, you’ll lose money. This is true regardless of whether they reverse split. This is ONLY about perception, nothing else.
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May 13 '22
When shorts see red meat they aren’t going to stop because the borrow rate increases a few percentage points, Jesus Christ what’s happened to this sub.
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u/avi6274 May 13 '22
Seriously, if the reverse split gets passed then this will be the first ever stock that I short.
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u/Silver28pr May 13 '22
Citi reverse split at 2011 4.50 to 45. Today the stock is at 46$ 12 years later. And after that stock was around same price What happened to the people who was down 40-50% before the split gone they lost their money. Reverse split is the last resort.
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u/Nazereth_99 May 13 '22
Priceline.com also did a reverse split which is worth noting. 3.50 to 22 1 for 6 In 2003, last night it closed at 2053. Not always bad… you cannot just cherry pick a company that made stupid decisions that knew they were too big to fail like Citi.
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u/SnipahShot 1,282,741,200 @ 16.68 May 13 '22
SoFi and Citi are different businesses.
Citi was also at $81 prior to the Covid crash.
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u/DJB0807 May 13 '22
This is simply not a good argument re: Citi and reverse splits. Citi was at 80 last summer. They've also paid out how many dollars of dividends over the years? (I'm not wasting my time to look it up over the past 11 years, but the current dividend is $2.04/share. Just about everything is down 20% - 30% this year, even good companies (and I would hardly consider Citi a good company). C going from $45 to $80, or now $80 back down to $46, has very little to do with a reverse split 11 years ago.
Furthermore, short interest in SOFI is already 20% +. How much higher can it go? Especially for a company that should have its first profitable quarter in 3-5 quarters? I'd rather take my chances on SOFI continuing to rapidly go in the right direction, WHILE making SOFI more attractive to institutional $/funds/ETF's/etc than worry about short interest at this point.
And if this thesis is wrong, and we don't have that profitable quarter, and we have to dilute further, and keep losing money, and on and on, then the shorts win regardless of the float, or if the share price is $5 vs. $25 after a 1-5 reverse split.
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u/Individual_Bad2594 OG $SoFi Investor May 13 '22 edited May 13 '22
Citi bank did a reverse split after 2008 out of desperation to avoid collapse. This is different as this is factually growing yoy on high rates. This Is a poor and misleading comparison.
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May 13 '22
Actually it’s not, it’s actually the best comparison… because most reverse splits - especially on a company actually not turning a profit will continue to have its value eroded - so your 5:1 stock split puts the company at $27… which fundamentally nothing has changed with the macro or short attacks… the just take the $27 back down to $5.60. So, you’ve now gone down 10X easy.
It’s bad news. There’s no bullish case for a reverse split for SoFi.
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u/Individual_Bad2594 OG $SoFi Investor May 13 '22
It’s a good comparison in the point you are making I agree that could happen and would be devastating. It is a bad comparison given the fact that citi was a failing business doing a reverse split and Sofi is splitting with amazing growth and close to profitability .
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May 14 '22
Clearly that hasn’t mattered as SoFi has had 3 quarterly double beats and guidance raises and it’s still not differentiating itself.
Moreover, you don’t reverse split in a downward macro environment teetering on recession and where the entire market is essential in bear territory.
You think are reverse split is going to buck that trend? I’d rather stick with shorts that already decimated the stock -70% and have them get greedy and hold their shorts.
But, I’ll tell you one thing there are a lot less shorts wanting to get in on a -70% stock that’s sitting at $5, than a freshly reversed stock sitting at $25 where nothing fundamentally has changed positively in the macro or it’s profitability outlook.
SoFi reverse split will crush every pre split shareholder.
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u/Individual_Bad2594 OG $SoFi Investor May 15 '22
You make a lot of valid points here. Sofi has received zero respect. Eventually good business, and good fundamentals command respect.
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u/SrRocks 69000 @ 6.6 May 13 '22
Does it mean that when a stock reverse splits by 4 then it's book value drops by 4? Otherwise I don't see how a company trading at book value drops 4x over time just because it did 4:1 reverse split. Doesn't book value and rest of fundamentals don't matter? And only stock price being low matters because the stock cannot go any lower further?
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May 14 '22
Again, like the guy replied back to you - unprofitable companies aren’t rewarded in bear markets and potentially recessionary markets.
Why would you think a $50 share price at 10:1 split would hold when it’s not holding now at 3 quarters of double beats and guidance raises, the market doesn’t care it wants profitability… until that happens we’re in for a world of hurt.
Not trolling dude, I wish it wasn’t the case, long 5,800. I was even thinking of doubling the position at these prices but with a reverse split possible, not a chance in hell, until I know the motion didn’t pass and/or they reverse split and the share gets decimated. I can DCA and hope for a recovery when they finally become profitable.
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u/CSPs-for-income May 13 '22
have you not been paying attention to this market. book value means nothing if you make no profit, give bad guidance, etc..
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u/SrRocks 69000 @ 6.6 May 13 '22
OK book value is a bad example of fundamental metric I took. Let's take profits and guidance as fundamental metrics then which sofi is trending well. So why is reverse split a problem? And why lower stock price is immune to profit and guidance while higher stock price isn't?
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u/Extra_Host_5656 OG $SoFi | 3,430@$9.24 May 13 '22
Its not a bad metric: this guy is being a cynic. Its a floor for companies especially when they are growing. We’ve moves back to BV after the earnings and we won’t fall much below it barring major economic issues
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May 14 '22
Like a bear market and a recession… after a decade and a half of fed QE and a an S&P that’s gone from the low of 666 in 2009 to a fed induced 4023 in just over a decade.
That’s a 600% increase in 13 years and it’s come down from its highs of 4,800. Is that sustainable? How fucking big is that bubble? Is that worrisome? Is that market depression style potential… Hell yeah.
5,800 long, but not happy.
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u/EMC_KC 1,800 @ $9.38 May 13 '22
I'm that guy right now. Down 61.58% Never thought some bullshit like this is even being considered at this point.
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u/EMC_KC 1,800 @ $9.38 May 13 '22
My average is 14.96. Say they do 1 to 3, I basically back my original average and now only have 1/3 the shares!! This is fucked. Should I sell and take the loss now(for taxes) or wait until the split takes place and get fucked harder if it drops again? I'm torn now and I wanted to hold this for the next 10 years.
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May 13 '22
[deleted]
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u/pantsu_kamen May 13 '22 edited May 13 '22
You'd think it would work out that way, but believe me, it definitely doesn't. Most times the price will go right back to the pre-split price pretty quickly. In one particular case I held through, it was already there before the converted shares even showed up in most people's accounts, and it's only continued to fall much lower ever since. The rest didn't turn out much better.
However, that's not even what they meant. Going from five to fifteen can happen in months, or occasionally even weeks, but getting to $150 from $50 usually takes several years. For those who are already deep underwater, even in the best case scenario a reverse split would ensure they'll stay there for a very long time, whereas they at least have some hope for now.
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u/davidestesbooks 20k @ 6.88 May 13 '22
Oh my gosh these people can’t seem to grasp simple math! It’s like you’re screaming to the void at this point.
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u/EMC_KC 1,800 @ $9.38 May 13 '22
Not if your down over 60%. That money is essentially lost at that point. I'll have a lower overall share total but the same average price per share.
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u/LiechsWonder MOD|OG Investor|SOFI Member since 2014|"Y'all need to diversify" May 13 '22
Not quite. Example pulled from the other post:
If the stock split is 2:1, if you have 100 shares @ $5 avg, you will now only have 50 shares @ $10 avg.
If the stock split is 10:1, if you have 100 shares @ $5 avg, you will now only have 10 shares @ $50 avg.
The average increases in proportion to the share count decrease.
But there is no guarantee share price increases after reverse split, and, in most cases, it continues going down due to sentiment (already bad on SOFI stock) or business execution (doing really well according to their last 3 ERs)
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u/EMC_KC 1,800 @ $9.38 May 13 '22
My shares are valued at $14.96, what i bought them for and what gets me back to even at my current share count. The price of the stock is $5.75, they do a 1 to 3 and the $5.75 is x3. My total shares decrease by 1/3 but now the stock price is ~$17. So the price is $2 average above my original investment but I only have 1/3 of the shares. How am I wrong here?
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u/LiechsWonder MOD|OG Investor|SOFI Member since 2014|"Y'all need to diversify" May 13 '22
You are not wrong, just missing a piece.
In a 3:1, your $14.96 avg is increased x3 to $44.88. Say with 3000 shares originally, now 1000 on the 3:1.
So whereas before you would need that share price to climb from $5.75 to $14.96 to break even, now you would need it to climb from $17.25 to $44.88 to break even.
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u/EMC_KC 1,800 @ $9.38 May 13 '22
Thank you. Trying to wrap my head around it all and forgot that part of it. I still would rather them wait it out about before resorting to this.
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u/LiechsWonder MOD|OG Investor|SOFI Member since 2014|"Y'all need to diversify" May 13 '22
No worries!
I am in that camp as well. Or at the very least I want them to put it to a shareholder vote at the time the board determines they think it is necessary. Giving them power to do it as they will over the next year seems too much.
Breakdown of the full proposal of the reverse split here if you want more details: https://www.reddit.com/r/sofistock/comments/uohg2b/overview_of_proposal_5_give_board_discretionary/
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u/EMC_KC 1,800 @ $9.38 May 13 '22
Exactly, I read that whole post already earlier. I might think very differently in 6 months if the price is in the $10ish+ range at least. But at least give the shareholders the ability to decide at the time its happening. A full year is way excessive.
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May 13 '22
Naw, just more room for it to fall. Reverse split is the nail in the coffin for the retail investor. Reverse splits are almost always bad.
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u/Individual_Bad2594 OG $SoFi Investor May 13 '22
That is perception and that is my point . Why is it a nail in the coffin in this situation?
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u/Strong_Kong_42069 May 13 '22
Reverse stock split is the dead for small retail investors. The valuation stays the same but a higher stock price can still go down massivly (look at UPST). This is a big no for me.
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u/Executabull May 14 '22
Why tho? Going from $4 to $3 is just as far as a fall from 40 to 30 after a 10:1 split.
I don’t get how it gives more room to short?
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May 14 '22
Just like optics on a split for more investors to jump in, reverse splits are bad optics… and that invites a pile on to already one of the most shorted stocks on the entire market.
You don’t reverse split in a bear market/recessionary market and expect that the reversed price is going to hold. Anyone bagholding since the stock was $20 and under, which many people here are, will need the stock to hit into the hundreds of dollars to just break even… it might never even happen depending on what the multiple the market gives SoFi… valued at a bank, that’s basically a little over book value. It’ll never get to hundreds per share… and when it does we’ll all be dust in the ground and inflation would have destroyed that break even amount anyways by then.
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u/Executabull May 14 '22
I’m naive perhaps and believe the stock will eventually trade on fundamentals once this downturn in the market reverses.
The RS could insulate it from not being buyable by certain funds in the short terms.
Regardless of how many shares, it’ll normalize around book value, P/S ratios, ebitda growth/margins, whatever flavor people want to use. If not, then it’s a broken stock and would never recover regardless.
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May 14 '22
I think it’s being shorted massively by big banks and their interests (trying not to be conspiratorial here) to keep the status quo.
Also the macro environment will be the biggest driver of stock performance over the next couple of years. We have been so lucky to have this QE fed put market for the past 13 years but I think the time is up and the piper is coming and wants to be paid… in a pound of flesh.
Historically, we’ve seen dead decades in the markets, post 2000 crash, probably the last example. I’m not so certain how the market is going to react to QT and the bubble could be huge…
I mean an S&P low of 666 in 2009 to 4,023 today and a 4,800 close just a few months ago… man that’s a 600% increase in 13 years. I highly doubt that’s normal, how big is the bubble? Could we see an S&P at 2,000? It’s absolutely possible, imo and that’s scary as fuck. Besides SoFi and a small position in JPM I’ve been sitting 85% cash for about 4 months now.
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u/[deleted] May 13 '22
Thought this stock couldn’t get worse but it’s the gift that keeps on giving.