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When a company completes a reverse stock split, each outstanding share of the company is converted into a fraction of a share. For example, if a company declares a one for ten reverse stock split, every ten shares that you own will be converted into a single share.
Key Takeaways. A company performs a reverse stock split to boost its stock price by decreasing the number of shares outstanding. A reverse stock split has no immediate effect on the company's value, as its market capitalization remains the same after it's executed.
In a reverse stock split, proportionate adjustments are generally required to be made to the per share exercise price and the number of shares issuable upon the exercise or conversion of all outstanding options, warrants, convertible or exchangeable securities entitling the holders to purchase, exchange for, or convert ...
A reverse stock split has no immediate effect on the company's value, as its market capitalization remains the same after it's executed. However, it often leads to a drop in the stock's market price as investors see it as a sign of financial weakness.
For example, if a company declares a one for ten reverse stock split, every ten shares that you own will be converted into a single share. If you owned 10,000 shares of the company before the reverse stock split, you will own a total of 1,000 shares after the reverse stock split.
Listing Rule 5250(b)(4) will require companies to provide public notice of a reverse split, using a Reg FD-compliant method, no later than p.m. ET at least two business days prior to the proposed market effective date.
A stock split gets issued by a company's board of directors in an effort to become more affordable to potential investors. The announcement tends to come a few weeks before the stock split goes into effect so current investors aren't caught off guard and potential investors can make plans to buy shares.
Companies may issue press releases notifying the public of a reverse split. If a company is required to file reports with the SEC, it may notify its shareholders of a reverse stock split on Forms 8-K, 10-Q and 10-K.