Reverse Stock Split: It's Not the End. The Real Points to Watch

A reverse stock split is, simply put, 'reducing the number of shares to increase the price per share.'
For example, in a '10:1 split' where 10 shares are consolidated into 1,

• 1,000 shares × $1
  ↓

• 100 shares × $10

It looks something like this.
The company's total market capitalization basically remains unchanged.

Benefits

1. Avoiding the risk of delisting

This is the most common reason.

Especially with U.S. stocks, NASDAQ and NYSE have a rule that
'you cannot maintain your listing if the price is below $1 for a certain period.'
This is the rule.

Therefore, low-priced stocks

• $1 → $10

try to clear the criteria by raising the apparent stock price like this.

2. Making it easier for institutional investors to buy

Funds and pension groups sometimes have rules such as

• do not buy stocks under $5

• ultra-low-priced stocks are prohibited

in place.

By raising the stock price,
they aim to escape from being seen as a 'suspicious low-priced stock.'

3. Improving the 'appearance'

A $10 stock is psychologically more reassuring than a 50-cent stock.

Depending on the company,
there are also cases where they aim to 'improve the corporate image.'

4. When volatility settles down a bit

Ultra-low-priced stocks fluctuate wildly with just a one-cent move.

Because the price range structure changes after a split,
the number of short-term traders may decrease.

Disadvantages

1. It is very easily viewed negatively

In the market,

there is a strong image that

"it is something done by companies whose stock prices have fallen too far."

Therefore, they are often sold off immediately after the announcement.

2. There are many cases where the price falls further after the split

This is the biggest problem.

For example,

• a 10-for-1 split

• stock price $1 -> $10

happens, but

after that,

• $10 -> $5 -> $2

there are quite a few companies that fall again.

Companies that are chronically in the red or frequently issue new shares are especially viewed as risky.

3. Decreased liquidity

Because the number of shares decreases,

• lower trading volume

• wider spreads

are likely to occur.

It may become more difficult to trade.

4. Prone to being a target for short selling

In the market,

"a reverse split equals a weak company"

is often the perception, and
there are cases where they are targeted by hedge funds.

This is especially common with U.S. small-cap stocks.

Conversely, are there "successful reverse splits"?

Yes, there are.

For example,

• just before a performance recovery

• major contracts

• thematic relevance such as AI, nuclear power, or semiconductors

• turning profitable

• government projects

when these overlap,

"it becomes the real deal after the reverse split"

There are also stocks that do this.

However, in the market as a whole,
statistically, more companies struggle after a reverse split.

Points for Investors to Watch

When looking at a reverse stock split,

• Why are they doing the split?

• Cash balance

• Frequency of capital increases

• Revenue growth

• Timeline to profitability

• Government support

• Whether they have an actual product

These are the things that are closely scrutinized.

In other words,

Whether it is "a company just trying to prolong its life" or "preparing for growth"
will result in completely opposite evaluations.

The evaluation will be completely opposite.

(Bonus)

If $CAN (Canaan) performs a reverse split

Currently,

It is in a state of "duality."

1. The Business Content (The Current Core)

CAN is not just a mining company; it has three main pillars.

● ASIC Mining Equipment Sales

• Manufacturing and selling Bitcoin mining machines

• Grows with leverage when the market recovers

● Proprietary Mining

• Actually mining BTC

• Revenue linked to BTC price

● BTC Holdings

• Holding mined BTC as assets

• BTC rise = increase in asset value

👉 In other words,
a model linked to everything: "BTC price x mining x equipment sales"

2. Strategic Changes (This is important)

Recent trends:

● Utilizing power in Canada and North America

• Mining with low-cost electricity

• Shifting to energy efficiency focus

● Focus on mining efficiency

• Rather than "how much can be mined"

• "How cheaply can they mine?"

👉 A significant turning point in terms of industry structure

3. Financial and Market Realities

● Past capital increase shock

• Capital increase announced near $2

• Plummeted to the $0.5 range due to disappointment selling

👉 This caused a major loss of credibility

● Current stock price status

• Ultra-low (in the $0.5–$1 range)

• “Weak investors have mostly exited” state

● Listing maintenance risk

• NASDAQ $1 rule

• Warning/split risk if not met

👉 A reverse stock split is a realistic option

4. Reverse stock split scenario

If a split occurs:

● Short-term

• Improved appearance of stock price

• Avoidance of delisting

• Passing the institutional investor filter

● However

• If seen as a "life-prolonging measure," it will be sold off

● Long-term turning point

What is important after the split is this:

• Will the BTC rise continue?

• Will there be no capital increase?

• Will mining profits be generated?

• Will equipment sales recover?

⑤ Short (selling) structure

• Short Float: approx. 10-13%

• Days to Cover: approx. 5-6 days

👉 "Not too high, but a structure prone to burning"

Important points

Shorts are mainly based on:

• Delisting risk

• Concerns about capital increase

• Expectations of penny stock collapse

are the premise

👉 In other words, if the premise collapses, it is dangerous

⑥ The "bullish scenario" you are looking at

Your story is as follows:

● 1. Exit of the weak

• Sell-off complete from $2 to $0.5

• Holder structure becomes lighter

● 2. BTC rise

• Mining profitability improvement

• Increase in BTC asset value

● 3. Power cost advantage

• Low-cost power in Canada and North America

• Mining cost improvement

● 4. Merger

• NASDAQ maintenance

• Start of market re-evaluation

● 5. Short squeeze

• Collapse of the premise

• Supply and demand reversal

⑦ Essential market evaluation

Bearish

• Capital-increasing companies

• Stocks at risk of delisting

• BTC-dependent gambling stocks

Bullish

• Companies in the process of becoming BTC infrastructure

• Stocks undergoing restructuring of power and mining efficiency

• Stocks with crowded short positions

(8) Summary of the Essence (Crucial)

The essence of $CAN is this:

And right now:

• Both sides could be correct

• It is at a stage where it could go either way

In a nutshell,

$CAN is currently,

and,

the reverse stock split could be the turning point for this.

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