On the stock reverse split, Citigroup and American Airlines did it after nearly being bankrupt. Apple did it recently as the world's richest company (by cash reserves). It is of course not a positive thing to have to do it in the first place but plenty of firms have done it and gone on to be fine, albeit that only 1 of my examples (AA) had to do it because of the $1 rule from memory (it was quite some time ago and I can't be bothered to google it).
One thing to bear in mind is, as previously stated, the crude valuation metric for business is the number of shares on issue x current share price. CHC is a volatile stock for 3 reasons:
1. It isn't doing so well financially as has been discussed at length here, partly because it is tied to the oil price which is also very volatile at the moment.
2. There is very little point in any firm buying in as your voice as a shareholder will not be heard as the firm is in effect private with CD&R and FR proxies owning most of the stock.
3. There are not many shares which come up for trading on a daily basis which leads to mini 'block trades' rather than a highly liquid and therefore smoother change in the price. This is not uncommon in smaller stocks, and by NYSE standards, CHC is a little company.
If you significantly reduce the number of shares in circulation and maintain all other assumptions, the price will retain large volatility, it's just that the absolute value of the stock should remain higher. Don;t be surprised to see the 7-10% daily fluctuations we have seen regularly over the last months both up and down.
I'd personally be surprised if the stock went back to being $1 again after this process is finished; that would value the business at about $40m which is crazy even if you do assume that the value of the stock is derived from present value of future earnings flavored with market based sentiment.
My 10c worth anyway.
Last edited by nowherespecial; 27th Oct 2015 at 15:34.
Reason: Glaring omission