Splits and reverse splits really don’t change the fundamental condition of anything. It’s really just engineering. BUT, with that said, reverse splits sometimes make investors feel better about it because the price is further from zero and, in this case, it allows oil more time to turn around before getting closer to zero. Because of the wackiness of what crude oil has done, they’ve needed to make some changes. Crude oil has done some stuff it’s never done in its trading history. It’s why things like the May crude oil contract going negative, caused brokers like Interactive Brokers to be on the hook for negative amounts in their crude oil futures contracts that their futures clients held, etc.
Was it a good idea in this instance for a reverse split? Probably. What I don’t like is some brokers cutting off people’s ability to buy it because they alone can cause a lack of buying volume strictly because they prevent their clients from buying.
We are in uncharted territory with oil and USO. We know oil won’t be down forever, especially after the economy cranks back up and begins to function somewhat normally again (which may take a bit). But we don’t know ahead of time if USO will be a winner or not for us.
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