Reverse stock split
Reverse stock split
A reverse stock split or reverse split is the opposite of a
stock split, i.e. a stock merge: a reduction in the number of shares and an accompanying increase in the share price. [ [http://www.sec.gov/answers/reversesplit.htm Reverse Stock Splits at U.S. Securities and Exchange Commission] ] The ratio is also reversed: 1-for-2, 1-for-3 and so on.
There is a stigma attached to doing this so it is not initiated without very good reason. Many
institutional investors and mutual funds, for example, have rules against purchasing a stock whose price is below some minimum, perhaps $5. An extreme case would be when a share price has dropped so low that it is in danger of being delisted from its stock exchange.
It is also possible that a reverse stock split could be used as a tactic to reduce the number of shareholders. In a hypothetical 1-for-100 reverse split any investor holding less than 100 shares would simply receive a cash payment and no shares of stock. If the resulting number of shareholders has then dropped below some threshold, it may be placed into a different regulatory category.
Typically, the stock will temporarily add a "D" to the end of its ticker during a reverse stock split.
* [http://www.essortment.com/home/financialdefini_seur.htm Stock split and reverse split examples for shareholders]
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reverse stock split — n: a method of increasing the value of shares of corporate stock by calling in all outstanding shares and reissuing fewer shares having greater value compare stock split Merriam Webster’s Dictionary of Law. Merriam Webster. 1996 … Law dictionary
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… … Financial and business terms
Reverse stock split — A proportionate decrease in the number of shares, but not the 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 … Financial and business terms
reverse stock split — The reduction in the number of corporate shares outstanding by calling in all shares and issuing a smaller number, though the capital of the corporation remains the same. It is the opposite of a stock split. Its effect is to increase the value of … Black's law dictionary
Reverse Stock Split — A reduction in the number of a corporation s shares outstanding that increases the par value of its stock or its earnings per share. The market value of the total number of shares (market capitalization) remains the same. For example, a 1 for 2… … Investment dictionary
reverse stock split — See also change in nominal value / consolidation Corporate action that consists of a change in nominal value, a consolidation. With this corporate action, the number of outstanding shares of stock is decreased without any change in the… … Euroclear glossary
reverse stock split — noun a decrease in the number of outstanding shares of a corporation without changing the shareholders equity • Syn: ↑reverse split, ↑split down • Hypernyms: ↑decrease, ↑diminution, ↑reduction, ↑step down … Useful english dictionary
stock split — n: the division of the outstanding shares of a corporation into a larger number of shares thereby reducing the value of each share but not the total value of each holding compare reverse stock split ◇ The purpose of a stock split is to make the… … Law dictionary
Stock split — Occurs when a firm issues new shares of stock but in turn lowers the current market price of its stock to a level that is proportionate to pre split prices. For example, if IBM trades at $100 before a 2 for 1 split, after the split it will trade… … Financial and business terms
stock split — Occurs when a firm issues new shares of stock and in turn lowers the current market price of its stock to a level that is proportionate to pre split prices. For example, if IBM trades at $100 before a two for one split, after the split it will… … Financial and business terms