What is a Reverse Stock Split?
A reverse stock split consolidates current shareholders' shares to reduce a company's outstanding stock.
Whether a 1-for-2 or 1-for-3 reverse split consolidates old shares into new ones depends on the ratio.
The reverse split ratio boosts share price proportionally as market capitalization stays the same.
Companies may pursue a reverse split to boost share prices that have fallen below optimal trading ranges.
Divide the reverse split ratio by the number of shares outstanding. 1-for-2 reverse splits halves outstanding shares.
Despite consolidating shares, shareholder proportional ownership, voting rights, and value do not change.
Metrics like earnings per share (EPS) and book value per share increase proportionally with the higher share price.
Reverse splits meet stock exchange listing requirements and minimum share prices by raising share prices.
The ex-date is when the stock begins trading at the new consolidated price and adjusted terms.