Frontier Communications (NASDAQ: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.

  • (NASDAQ:BKNG) 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 (NYSE:C) 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 (NYSE:BH) 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.