Reverse Stock Split

A reverse split is the opposite of a regular stock split. The company merges a fixed number of old shares into one new share. The share count goes down, the price per share goes up by the same factor, and the total value of each shareholder's stake stays the same at the moment of the split.

Example: in a 1-for-10 reverse split, an investor holding 1,000 shares at $0.80 ends up with 100 shares at $8. The position is still worth $800.

Companies often use reverse splits to keep their stock listed. Major US exchanges require a minimum share price, commonly $1, and companies that stay below it for too long risk being delisted. A higher price can also make a stock eligible for more institutional investors.

Reverse splits are frequently viewed with caution, because they often happen at companies whose stock has fallen sharply. The split itself does not fix any underlying business problem, and prices sometimes keep falling afterward.

If a shareholder's holding does not divide evenly, the leftover fractional share is usually paid out in cash.