Reverse Stock Split

A reverse stock split combines a company’s existing shares into a smaller number of shares according to a stated ratio, such as 1-for-10. Immediately after the split, a shareholder owns fewer shares, while each remaining share should represent a proportionately larger piece of the company. A reverse split does not, by itself, create new economic value or dilute a shareholder’s percentage ownership. Public companies often use reverse splits to increase the quoted price per share, including when trying to satisfy an exchange’s minimum bid-price requirement. Later stock issuances, however, can still dilute the holders of the post-split shares.