By
Rick Aristotle Munarriz
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September 7, 2007
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Don't go calling Sun Microsystems (Nasdaq: JAVA ) a penny stock. Just because its shares have been coasting along in the single digits for more than five years doesn't mean the company is a slacker. Hoping to drive that point home, Sun will ask its shareholders to approve a 1-for-4 reverse stock split during its November annual meeting.
I know -- reverse stock splits are usually good for a chuckle or two. It's usually Plan Z for illiquid penny stocks in a last-ditch effort to seem reputable. However, not every reverse stock split is a disaster story. Stocks like Priceline.com (Nasdaq: PCLN ) and Brightpoint (Nasdaq: CELL ) have bucked the trend, going on to appreciate significantly since their respective reverse splits.
Sun is no slouch. The company commands a nearly $20 billion market cap. However, because it also packs 3.6 billion shares outstanding, the end result is that retail investors see a stock trading at $5-ish.
If the split is approved, investors will get one share priced four times higher for every four they own. It's a zero-sum game, but it's all about appearances here. Sun's turnaround is for real. Last week's ticker symbol change -- from SUNW to JAVA -- is no accident. The company is trying to distance itself from its chunky past, shedding its baggy share count like Jared Fogle huffing and puffing his way to Subway. It announced that it's on the prowl to snap up software companies earlier this week, and it's hard to flirt when you have to rattle off your share price like you're a toddler digging for worms in a sandbox.
"Golly, I'm five-and-a-half," isn't the best of pickup lines.
So even though I can be cynical about reverse stock splits -- and actually appreciate low-priced stocks -- I'm glad to see Sun going for the reverse here. If successful, maybe it will inspire other obvious beefy candidates like Sirius Satellite Radio (Nasdaq: SIRI ) and TiVo (Nasdaq: TIVO ) to follow suit.
If Jared can do it, so can you!
If you can't reverse your shares, reverse the clock to revisit these related stories:
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