Please ensure Javascript is enabled for purposes of website accessibility

3 Stocks That Had a Reverse Split and Lived

By Rick Munarriz - Jul 10, 2017 at 9:30AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Frontier Communications goes for a reverse-stock split, but it's not a fatal move. Priceline, Citigroup, and Biglari Holdings are proof that there's life after a reverse.

Frontier Communications (FTR) became the latest out-of-favor investment to execute a reverse split this morning. The struggling regional telco went for a 1-for-15 exchange, swapping every 15 shares for a single share at 15 times the price. 

It's a zero-sum game for Frontier, a quick trick to propel its stock from its $1.06 close on Friday into the mid-teens. The problem is that reverse splits rarely work out, because reeling companies typically keep sliding. A reverse split may be a way to woo institutional and retail investors that shy away form low-priced stocks, but a reverse split doesn't change a stock's negative momentum. 

A man cradles a Frontier Communications hardhat.

Image source: Frontier Communications.  

Three stocks that bounced back

The odds are long for members of the Reverse Stock Club to truly recover, but it does happen. Frontier investors fretting the implications behind the split may be heartened to learn about some of the successful exceptions to the rule.

  • (BKNG 2.59%) is the biggest winner. It went through a 1-for-6 reverse split in 2003 when the online travel portal was flopping around after the dot-com bubble burst. Priceline has since become an 85-bagger -- not a bad haul over the past 14 years.
  • Citigroup (C 0.93%) hasn't fared as well as Priceline since its 1-for-10 split when its stock was meandering below $5 in the aftermath of the global banking crisis. Citigroup stock has risen 69% on a dividend-adjusted basis since the reverse split six years ago. The S&P 500 has risen 80% in that time, but Citi remains an absolute winner.
  • Biglari Holdings (BH -3.60%) was trading in the teens when it resorted to a reverse split, whereas Priceline and Citigroup were into the low single digits. However, going for a 1-for-20 reverse in late 2009 seemed like the right call to thrust its stock into the triple digits. The stock hasn't beaten the market, but Biglari Holdings has generated positive returns for its stakeholders, up an adjusted 42%. 

There are no guarantees that Frontier will follow in the footsteps of Priceline, Citigroup, and Biglari Holdings. The near-term stock action may be rough, as all three of the stocks were trading lower -- and in Priceline's case significantly lower -- roughly five months later. Frontier's hefty dividend may provide some downside support in the near term, but the real catalyst has to be an actual turnaround. Reverse splits aren't fatal, but that's only true for companies that help themselves.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Frontier Communications Corporation Stock Quote
Frontier Communications Corporation
Citigroup Inc. Stock Quote
Citigroup Inc.
$49.78 (0.93%) $0.46
Booking Holdings Stock Quote
Booking Holdings
$2,103.40 (2.59%) $53.02
Biglari Holdings Inc. Stock Quote
Biglari Holdings Inc.
$123.56 (-3.60%) $-4.61

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/20/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.