Reverse Stock Split Definition. Reverse Stock Split is a company action that results in a reduction of the number of shares of a company currently outstanding in the market. For example, under stock split 1 for 2, an investor receives 1 stock for every 2 stocks that they hold thereby reducing the number of stocks held by the investor to half. In effect, you start out with 10 shares of stock worth $2.00 per share and assuming there is a one-for-two reverse split, you will wind up with 5 shares worth $4.00 per share. To make this easier to understand, let's assume for a moment you have two $50 bills. Definition of Reverse Stock Split What is a Reverse Stock Split? A reverse stock split is when a company reduces the number of their outstanding shares. The value of the shares and the company's earnings per share will rise proportionally after the split. For instance: you own 1,000 shares in XYZ, and the current market value of each share is $1.00. A reverse stock split reduces the number of issued shares but without changing the total value of all shares issued. With a reverse stock split, you end up owning fewer shares but each share is Reverse stock splits boost a company's share price. A higher share price is usually good, but the increase that comes from a reverse split is mostly an accounting trick. The company isn't any more valuable than it was before the reverse split. Whatever value it has is just distributed over fewer shares of stock, If the stock split ratio is 3:2, investors receive one additional share for every two shares they own. Reverse stock splits decrease the number of shares you own. If a reverse split ratio is 1:5, then the company takes four shares for every five shares you own. Calculating Split Ratios. There is no formula for calculating how many shares you receive in a split. A quick way to determine how many shares you receive in a split is to make the two sides of the ratio even. What's a Reverse Stock Split, and Can It Really Help a Company? Reverse stock splits don't have any impact on a company's value, but they often are a sign of trouble. Motley Fool Staff
13 Dec 2013 to (i) effect a reverse stock split of our common stock at one of two reverse split ratios and (ii) reduce the number of authorized shares of our 15 Dec 2016 1.1.1. Share price marketing and the definition of normal stock splits. There are two options for a company to increase its number of shares: it
23 May 2013 If investors view one reverse split as a desperate act on the part of managers, then two or more reverse splits by the same firm may be seen as a 20 Feb 2012 For instance, a 5 to 1 reverse stock split of shares of a given class will stock ( MBCA), tend to deal with forward / reverse splits in one of two 24 Jul 2017 A 1-for-7 reverse stock split that goes into effect at Supervalu on Aug. 2 will boost the company's stock price and earnings per share but the 22 Mar 2011 Of those fourteen stocks, twelve were higher one year after the effective date of the reverse split, two were lower. The average gain was a 2 Jan 2002 The reverse stock split is a mechanism increasingly being used to prop up tech editor of the 2-for-1 Stock Split newsletter in Menlo Park, Calif.