A crop of publicly traded small companies in Los Angeles has decided the time is right to increase share price through a reverse stock split, with the eventual goal of getting on a major exchange and raising capital.

Also, they want to avoid the world of penny stocks, where pump-and-dump schemes and other scams can breed.

Four small-cap companies in Los Angeles County have conducted reverse stock splits in the last three months. In August, L.A.-based biofuel company OriginOil Inc. completed a 1-to-30 split and BioSolar Inc., a solar panel manufacturer in Valencia, also shrank its shares by a 1-to-30 proportion.

In September, Catasys Inc., a West L.A. provider of health management services, declared a 1-to-40 reverse split. Finally, True 2 Beauty Inc., a consumer product distributor in Commerce, announced a 1-to-100 reverse split on Oct. 28 that has yet to be completed.

Although the specific circumstances of each company vary, the reason all the companies gave for the decision was to qualify for a listing on a major exchange, such as Nasdaq, and get off the over-the-counter Bulletin Board. A stock price above $1 per share is a prerequisite for a Nasdaq listing.

True 2 Beauty, which sells sex enhancement pills, electronic cigarettes and hair curlers through infomercials, went public last year through a reverse merger. When many stockholders of the previous company decided to sell their shares, it drove share price below 1 cent. The board decided to put the new company on solid footing by standardizing its financial reporting, making a reverse stock split and then moving off the Pink Sheets to an exchange.

“As the company grows, we plan to raise capital with equity,” said Darryl Cohen, spokesman for True 2 Beauty. “It’s fairly difficult for a company that trades at half a penny.”

Even if the company doesn’t qualify for an exchange, increasing its share price to around $1 can help. Many broker-dealers won’t sell shares below 10 cents, and federal regulators are scrutinizing the clearinghouses that distribute shares that trade for less than a dime.

“Clearinghouses get into trouble for moving these shares because regulators have noticed a lot of scams and pump-and-dump schemes among penny stocks,” Cohen said.

Alex Cappello, chief executive of investment bank Cappello Capital in Santa Monica, said that in addition to Nasdaq’s $1-per-share rule, many mutual and institutional funds have policies that prohibit investment in stocks below $2 per share. As a company rises past these price points, its universe of potential investors grows.

“Any company doing a reverse split to get above these thresholds is smart,” Cappello said. “You’re far better off to have a higher priced stock in the long run.”

T. Riggs Eckelberry, chief executive of alternative energy company OriginOil, told the Business Journal in September that he decided on a reverse split because he wants to attract institutional investors and analyst coverage. But he also mentioned regulatory pressures.

“There’s been a sea change in the markets,” Eckelberry said. “This is largely due to much tougher compliance regulations. If a company is going to get decent financing, it’s got to get out of the Bulletin Board.”

OriginOil declined to comment for this article, citing quiet period rules. On Oct. 19, the company filed a prospectus with regulators for a secondary offering of securities. The prospectus did not specify the number of new shares.

Cappello said companies often try to announce a reverse split in close proximity to a major financial or operational event. A few weeks after its reverse split, BioSolar announced an agreement with a sales representation firm in Asia. Catasys stated in a press release that its reverse stock split, “when combined with anticipated future contractual activity and other anticipated company initiatives over the next quarter, will enable the company to list on a national stock exchange.”

But from an investor’s perspective, Frank Rizzo, a financial planner in Highland, Ind., said that reverse-split companies often have a history of stock price declines, and unless investors have a strong reason to suspect a turnaround, the price declines are likely to continue.

“There is no reason to expect a reverse split will create good fortune for a company,” he said. “In fact, in many cases just the opposite is true. The reverse stock split just means the future drop will start from a higher price.”

Cappello said reverse-split companies have been high-risk investments, but a company with real revenue and sales potential shouldn’t be dismissed simply because of its low capitalization.

“It used to be that the value of a stock would decline in the short term after a reverse split, but I believe that may not be the case anymore,” he said. “At any rate, if a company does it, they are more likely to succeed in increasing liquidity and raising money.”