Definition
A reverse stock split consolidates existing shares into fewer shares at a proportionally higher price. In a 1-for-10 reverse split, every 10 shares become 1 share at 10 times the price. Total market value remains unchanged. Companies perform reverse splits to meet minimum price requirements for exchange listing, improve institutional perception, or reduce shareholder servicing costs. Reverse splits are often viewed negatively as they may indicate underlying problems. Fractional shares are typically cashed out.
Formula
Example
Your 1,000 shares of a $0.50 stock undergo a 1-for-20 reverse split. You now own 50 shares at $10 each. The $500 total value is unchanged, but the stock now meets NYSE's $1 minimum.
FAQ
What is Reverse Stock Split?
A corporate action reducing shares outstanding while proportionally increasing the share price.
How do you calculate Reverse Stock Split?
A common formula for Reverse Stock Split is: 新股数 = 旧股数 / 反向分割比率; 新价格 = 旧价格 x 反向分割比率
Why is Reverse Stock Split important?
Reverse Stock Split helps investors evaluate corporate actions and make more informed decisions.