Reverse stock splits let small companies dodge delisting, dilute shareholders, and enrich their financial backers through a maneuver that's the opposite of a traditional stock split. By Bill Alpert

Many successful companies do stock splits to make their shares more affordable for retail investors. Hundreds of struggling companies are doing reverse stock splits to lift their flagging stocks above the $1 price needed to stay listed on the Nasdaq or New York Stock Exchange.

Reverse stock splits don't change a company's actual value, and they aren't themselves harmful. But outside shareholders can suffer because reverse splits are often accompanied by heavy issuance of discounted stock, convertible notes, and other securities to financiers, who sell them and cause the stock price to spiral downward, Nasdaq has noted.

While a traditional stock split divides an expensive stock into multiple shares, lowering the share price, a reverse split does the opposite. It combines many shares into one, raising the share price.

Consider Bollinger Innovations, an aspiring electric-vehicle maker, which has sold only a few vehicles, isn't profitable, and has an accumulated deficit of $2.6 billion since its 2010 inception. Bollinger has done eight reverse stock splits since 2022. At the same time, it has frequently issued new shares to its executives and financial backers, diluting retail investors and pressuring its share price. Despite all of the reverse splits, its stock currently trades at just 12 cents apiece. It just asked shareholders to approve another split.

Two Bollinger funders are financial felons; one was convicted of bank embezzlement in 1997, and the other was sentenced to prison three months ago for insider trading. The vehicle maker has registered more than $1 billion of stock for sale by these two men since 2021. That's a lot of stock for a company that currently has a fully diluted market cap of $50 million, according to its Aug. 29 proxy.

Our queries to Bollinger, its executives, financiers, and lawyers went unanswered.

A Barron's stock screen found dozens of low-price stocks that have undergone multiple reverse stock splits in a few years' time. Hyperscale Data has done seven reverse splits. Faraday Future Intelligent Electric has done three reverse splits. Faraday has registered more than $1 billion of stock for its funders since late 2022.

Most serial-splitter firms have tiny market capitalizations. But Faraday's daily volume reached 160 million shares one day last year.

The Nasdaq and the NYSE have tightened rules on reverse splits, but companies have adapted and ramped up their splitting. Petitions from the Securities Industry and Financial Markets Association, or Sifma; the market maker Virtu Financial; and the IEX exchange ask the U.S. Securities and Exchange Commission to make the exchanges tougher still.

"The negative impacts of reverse stock splits are not only felt by broker-dealers and their shareholders, but also by retail investors," said Virtu Deputy General Counsel Thomas Merritt, in a letter to the SEC last year. "These are classic penny stock companies that are often tied to pump-and-dump trading activity and other forms of market manipulation."

"Despite the prevalence of increased risks and greater costs for investors, exchanges like Nasdaq are incentivized by listing revenue to keep penny stocks listed," Merritt continued.

On some trading days in the past year, low-price stocks accounted for nearly 30% of all share volume, Sifma told the SEC earlier this year.

It's unclear how the SEC will respond. Among the first actions of the commission's new Republican majority was halting an enforcement campaign against the most active penny-stock financiers, including some who keep serial splitters going.

Nasdaq, the NYSE, and SEC declined to comment for this article. So did most of the stock splitters and the financiers that fund them.

In the 1980s, boiler rooms caused enough grief that Congress passed the Penny Stock Reform Act of 1990. Helping draw up the resulting SEC regulations was lawyer Paul Atkins -- now SEC chair.

Those SEC penny stock rules require a selling stockbroker to give warning documents to prospective buyers and approve their accounts for penny stocks.

Exchange-listed stocks, however, are exempt from those rules. Congress figured that the exchanges would keep out the bad apples. Today, the NYSE and Nasdaq generally require a $4 minimum stock price for initial listing. If the bid for a stock later falls below $1 for 30 consecutive days, the listing becomes imperiled.

When the trading public won't get a stock above a dollar, a reverse split will. In 2021, there were 31 reverse splits on Nasdaq, according to S&P Global Intelligence. In 2024, there were 464.

Some companies resort to the move over and over again. Bollinger came public in late 2021 as Mullen Automotive. It avoided an initial public offering by reverse-merging into a public company called Net Element, a troubled financial-technology firm with a negative book value.

Soon, Bollinger CEO David Michery was comparing his public company to Tesla and Apple on the podcast Cars, Yeah! Its "beautiful sexy" cars "will blow the doors off of most of the cars out there," Michery said.

In 2022, Michery reported $500 million worth of orders and hinted of a deal with General Motors. These sales didn't materialize, and Bollinger's share price fell 20-fold by September, to less than a dollar. Nasdaq gave the company a year to get its stock back above a buck. Bollinger got there in May 2023, with a 1-for-25 reverse split.

In the subsequent two years, Michery has unveiled a succession of electric vehicles and another $1 billion in orders. That yielded $10 million in sales and $900 million in losses.

With its stock repeatedly below Nasdaq's $1 listing threshold, the company has done repeated reverse splits at ratios as high as one share for 250. The compound effect of Bollinger's splits means that the stock has fallen more than a quadrillionfold in just three years.

"Presenting this reverse split proposal to the Company's Board of Directors for consideration and thereafter to our shareholders was one of the most difficult decisions I have made as CEO," Michery told shareholders in late 2023 before the third of eight splits.

Michery has received over $94 million in cash and stock as compensation in the past five years, according to Bollinger proxy statements. The company's Aug. 29 proxy filing showed he has one share of Bollinger stock.

Keeping the EV maker funded while it lost billions were the two financiers. Bollinger has reported an equity line of credit from Michael Wachs. He agreed in 1997 to be barred from the banking and brokerage industries after pleading guilty to embezzling $20 million from Chase Manhattan Bank.

An affidavit by Michery, in response to a Michigan lawsuit filed by an unhappy merger partner this year, described an investor who has put $800 million into the company over the past nine years. Filings show that investor to be Wachs. At least $745 million worth has been registered for his sale in the past three years. His actual sales aren't public record; Wachs currently holds 9.9% of Bollinger's market capitalization, according to the Aug. 29 proxy filing.

Additional funding came from convertible shares that Bollinger sold to a longtime Wachs associate named Terren Peizer. At least $585 million worth have been registered for Peizer in the past three years; he currently holds 7.8% of Bollinger's market capitalization, according to the proxy filing.

Barron's queries to Bollinger, Michery, Wachs, and Peizer got no response.

The financier backed other reverse-splitters. In 2023, Peizer appeared with company executives in a shareholder call by Faraday, a company that says its luxury EV will outperform the best cars from Ferrari, Lucid, or Tesla.

Peizer told Faraday investors that his personal holding company owned $2 billion worth of controlling stakes in small firms. "After looking at hundreds of deals, I'm quite convinced that Faraday Future is one of the most compelling investment opportunities we have seen in a long time." he said.

Soon after, Faraday reverse split 1 for 80. It did two more splits and became popular among meme stock investors who pushed daily volume to a December 2024 peak of 160 million shares.

As a business, Faraday lost $350 million in 2024 to bring its accumulated deficit above $4.3 billion. With its stock at $1.77, the company now promises a $20,000 EV that will achieve mass market sales. It has delivered only a few vehicles to date.

Peizer stepped back from funding companies like Bollinger and Faraday when he was charged in May 2023 with insider trading in the stock of Ontrak, a company he ran as CEO. After Peizer's conviction on those charges, a federal-district court judge in Manhattan sentenced him in June 2025 to 3 1/2 years imprisonment with mandatory treatment for drug abuse. For its part, Ontrak did three reverse splits under Peizer.

Asked about Peizer, Faraday says the financier had passed its 2023 background checks and no longer holds any shares to the best of its knowledge. As for reverse splits, the company has sworn them off.

"Reverse stock splits can reduce a listed company's appeal to investors, " Faraday told Barron's. "However, Nasdaq's rules around reverse splits serve a vital role -- they give companies with strong core value but facing operational hurdles a chance to come back stronger."

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September 12, 2025 21:31 ET (01:31 GMT)

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