In order to reduce the number of outstanding shares, Time Warner has asked shareholders to approve a reverse stock split. According to "MarketWatch," After the seperation of Time Warner Cable, Time Warner's stock is actually expected to decline. By asking for a reverse stock split, outstanding shares from the seperated Cable would advance the stock. The unfortunate consequence of a reverse stock split is that it may sometimes cause shareholders to cash out so that they no longer own the company's shares.
Public relations practitioners however confidently state Time Warner's mix of businesses, including DVDs and movies, offers more resilience in a time of economic downturn than broadcast television. Because the nation is clearly in a recession at this time, shares continue to fall which indicates more of a rough road ahead.
The reverse stock split is may be Time Warner's best choice to make at this point in time because it decreases the amount of outstanding shares. As of November 20, there were 3.59 billion outstanding common shares in Time Warner. In eliminating some of these shares in the Cable television area which has been steadily dropping, the company can look forward to moving on perhaps a bit more successfully than before with the reverse stock split.
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I think the reverse stock split was a smart financial move for Time Warner. They took the facts and focused on the market and decided what the best option for them was. I was shocked to see that they had 3.59 billion outstanding common shares. That is a huge number! Witch cable TV dropping I think they made a good move by getting out before they lost more money during this bad economy.
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