Investors are granting the media giant the right to declare a reverse stock split, giving Time Warner elbow room to increase its share price after it completes its separation with Time Warner Cable
Unlike the more conventional forward stock splits, which seem to trickle freely during bull markets, reverse stock splits work the other way around. Time Warner has the authorization to declare a 1-for-2 or 1-for-3 reverse split. For example, with its stock kicking off the new trading week at $9.61, a 1-for-2 split would find every two shares outstanding replaced by a single share at $19.22.
This maneuver is a zero sum game -- and a humbling one. However, with several other media titans like CBS
Last year found companies such as Sirius XM Radio
This doesn't mean that the companies don't want to be armed. Sirius can go as deep as a 1-for-50 reverse split this year. Watching a stock like 2007 reverse splitter Sun Microsystems
Time Warner? You're on the clock. Good luck.
Further Foolishness looks backward:
Longtime Fool contributor Rick Munarriz knows that you can't turn back time, but you can take back shares outstanding. He does own shares in Six Flags. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.
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