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 ?
Stockholders of record as of the effective time of the reverse stock split will receive a letter of transmittal providing instructions for the exchange of their shares.
McCullar, president and chief executive officer of the bank stated that the reverse stock split is expected to benefit the bank and its stockholders by increasing the per share trading price of the common stock and enabling it to qualify as a marginable stock.
The reverse stock split will be managed by American Stock Transfer & Trust Company as exchange agent and will be coupled with the reincorporation of the company as a Georgia corporation.
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.
By reducing the number of outstanding shares through a reverse stock split, California Federal Bank's stock is expected to trade at a price high enough to be purchased on margin.
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 will result in a similar adjustment to the Company's outstanding stock options and securities reserved for issuance under its current incentive plans.
To proportionately raise the per share price of the Common Stock by reducing the number of outstanding shares, the Board of Directors believes that it is in the best interests of the Company's shareholders to implement a reverse stock split.
Abazias Diamonds (OTCBB:ABZS) today announced that the Abazias Board of Directors and major shareholders have approved a reverse stock split and established a ratio of 1 for 40.
Abazias Diamonds(OTCBB:ABZS) today announced that the Abazias Board of Directors and major shareholders have approved a reverse stock split and established a ratio of 1-for 40.