Reverse 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.

Reverse Stock Split

The act of a publicly-traded company reducing the number of outstanding shares while maintaining the same market capitalization. In other words, a company engages in a reverse stock split in order to increase its share price. For example, a company with a share price of $1.50 may cut its number of shares in half so that the price goes to $3. Companies only conduct a reverse stock split if it desires to boost its share price when it is unable to do so by other means. Some companies consider reverse stock splits a last resort to avoid delisting from the exchange as the result of a share price that is too low.

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.

Reverse stock split.

If a company's stock is trading at a low price, the company may decide to reduce the number of existing shares and increase their price by consolidating the shares.

For example, a 1-for-2 reverse stock split halves the number of existing shares and doubles the price. In that case, if you hold 100 shares of a stock selling at $5 a share, for a combined value of $500, in a 1-for-2 reverse stock split, you would own 50 shares valued at $10 a share, which would still give you a combined value of $500. Stocks may be reverse split 1-for-5, or 5-for-10, or in any ratio the company chooses.

Reverse splits are generally used to ensure that a stock will continue to meet listing requirements on the market where it is traded or to encourage purchases by institutional investors, who may not buy stocks priced below a specific point.

References in periodicals archive ?
We believe that the reverse stock split will position Immune Response's stock in a price range that is more attractive to a broad range of institutional investors as well as members of the sell-side community," said Dr.
The reverse stock split will be effective at 11:59 pm (ET), on Wednesday, November 15, 2006.
In connection with the reverse stock split, the Board of Directors of the Bank has determined to reduce the number of authorized shares of the Bank's common stock from 120,000 shares to 120 shares.
The reverse stock split affects all shares of common stock, stock options, and warrants of Abazias outstanding as of immediately prior to the effective time of the reverse stock split.
We are evaluating the listing requirements for each exchange and intend to apply for a national listing as soon as possible after the reverse stock split and reincorporation are completed.
The reverse stock split, which has received Board of Directors and shareholder approval will go into effect at the commencement of trading on Monday, August 28, 2006.
The completion of the 1-for-10 reverse stock split was a critical step in the Company's plan to regain compliance with the listing requirements of the Nasdaq National Market.
The reverse stock split was proposed by the Company's Board of Directors in an effort to, among other things, comply with the $1 minimum bid price requirement of, and to remain listed on, the Nasdaq Capital Market.
The reverse stock split was approved by the Company's stockholders at the annual meeting of stockholders held on June 7, 2006.
NASDAQ: WAVX) announced that it has filed a preliminary proxy statement with the SEC for a special meeting to be held on July 24, 2006 seeking stockholder approval permitting the board to implement a reverse stock split of Wave's common stock at a ratio of either 1:2, 1:3 or 1:4.
Nasdaq:VERT),a leading provider of on-demand supply management solutions, today announced it completed its debt financing and plans to effect a reverse stock split on June 12, 2006.