reverse stock split

Reverse Stock Split

A reduction in the number of a corporation's shares outstanding that increases the par value of its stock or its earnings per share. The market value of the total number of shares (market capitalization) remains the same.

Notes:

For example, a 1:2 reverse split means you get half as many shares, but at twice the price.

It's usually a bad sign if a company is forced to reverse split. Firms do it to make their stock "look" more valuable, but in reality nothing changes. A company may also do a reverse split to avoid being delisted.

See also: Stock Split

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Reverse stock split

A proportionate decrease in the number of shares, but not the total value of shares of stock held by shareholders. Shareholders maintain the same percentage of equity as before the split. For example, a 1-for-3 split would result in stockholders owning one share for every three shares owned before the split. After the reverse split, the firm's stock price is, in this example, three times the pre-reverse split price. A firm generally institutes a reverse split to boost its stock's market price. Some think this supposedly attracts investors.

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reverse stock split

A proportionate reduction in the shares of stock held by shareholders. For example, a one-for-four split would result in stockholders owning one share for every four shares owned prior to the split. A reverse stock split has no effect on a firm's financial and operational performance and is often designed only to boost the market price of the stock so it won't be delisted from trading on an exchange that imposes a minimum share price requirement. Also called split down. Compare split.