In early 2011, Bob and Bill make a $100 bet on Citibank's stock.
Bob held 100 shares at a price then of about $4.50 per share. He likes Citibank.
he thinks it is a good solid financial institution and that it will bounce back
from it's recent decline. Bob says that the stock will increase in value over the
next year and bets Bill that Citibank will move up to $30 by Jan 1, 2012.
Bill doesn't like the financial sector or Citibank's prospects over the next year
and thinks it improbable that Citibank will recover, certainly not to anywhere
near the $30 level. Bill takes the $100 bet.
On May 6th 2011, Citibank conducted a 1-for-10 reverse stock split.
On May 5th Bob had 100 shares at $4.48 per share.
On the 6th he had 10 shares at $44.80 per share.
Bob feels that he won the bet since the stock reached the price objective he stated
and that how it achieved that objective is irrelevant.
Bill feels the stock reached the price objective through company manipulation and
achieved no actual increase in value, an implied if not stated component
of the bet. Had no reverse split occurred, the stock on Jan 1, 2012 would not have been above $30.
Since the possibility of a reverse split was never discussed when the wager was agreed upon,
based on the information above and what you reasonable believe to be the understanding of
each party regarding intention and meaning of the terms of the wager-- who won the bet?