Gtronic completed a reverse split of 5-to-1

Globetronics Technology Bhd ('Gtronic') completed a share consolidation (or, reverse split) of 5-to-1 on March 13th. What this means is that a shareholder, who has 5,000 shares of RM0.10 each prior to March 13th, will end up with only 1,000 shares of RM0.50 each on March 13th (if he has not disposed off his shares before March 13th).

Gtronic was trading at about RM0.12-13 before the share consolidation. So, after the share consolidation, one would expect the market price of Gtronic share to trade around RM0.60-65. Instead, the share price dropped over the last 2 days and it dropped again to RM0.465 at the close of today's morning session. There is nothing wrong with Gtronic (see the next story). This is not a share consolidation that is part & parcel of a restructuring case, where the share capital would be reduced in a capital reduction. This is similar to PBBank's share consolidation of 2-to-1 that was carried out in May 2004 (see Chart 2 below). I can only conclude that the market is reacting wrongly in this instance & has presented us a buying opportunity. I believe that the market will correct itself & Gtronic share price will slowly inch back up to RM0.60-65 over the next few days.


Chart 1: Gtronic's daily chart as at March 16, 2009 (Source: Tradesignum.com)


Chart 2: PBBank's daily chart from March-August 2004 (Source: Tradesignum.com)