U.S. financials weren't invited to the stock market rally on Monday, with most of the big names falling slightly in late-morning trading. The slide comes after some impressive gains last week, when the U.S. Federal Reserve gave some of the bigger companies the green light for reinstating dividends and buying back shares - a clear sign of confidence in their financial strength.
The dip also comes after Citigroup Inc. announced a 10-for-1 reverse stock spit, effective in early May. Based on Monday's price, the reverse split - or consolidation - will transform Citigroup's $4.46 shares into $44.60 shares, without making anyone richer, of course.
There is some debate over whether such moves are good for share prices, just as there is some debate over whether actual stock splits are good for prices. Some mutual fund managers are prohibited from owning shares that are priced under $10, so the consolidation, presumably, could make Citigroup shares available to more investors.
Still, the move could be largely symbolic. Eddy Elfenbein at Crossing Wall Street notes: "There's an odd belief that quality stocks need to have higher share price. I think Wall Street seems it's a bit gauche when your stock can't break $5."
"I'm always amazed at the attention investors pay to the actual share price - not the value - but the nominal price. I often hear investors say that they don't like stocks over $50 or $60. Why? It makes no sense."
David Berman