The reverse stock split, announced by the bank on Monday, could see total daily industry volume decline by around 5 per cent-6 per cent, according to estimates by Barclays Capital reported on the FT’s Alphaville blog.
Market participants should beware any reports saying the drop in volume is a bad sign for the equities market overall, reports Alphaville, quoting research from Jeffrey Rubin of Birinyi Associates.
‘We won’t be surprised when we read in a few weeks that volume is declining and how this is a negative signal for equities,’ comments Rubin. ‘Just be aware that it is because of a structural change and not a ‘real’ decline in volume.’
Citigroup said on Monday it expects the reverse stock split to take place after the close of the market on May 6, 2011. The move will reduce the number of common shares outstanding from around 29 bn to 2.9 bn.