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The number of outstanding shares of Common Stock will be decreased as a result of a Reverse Stock Split, but the number of authorized shares of Common Stock will not be so decreased.
For example, a common stock split ratio is a forward 2-1 split (i.e., 2 for 1), where a stockholder would receive 2 shares for every 1 share owned. This results in an increase in the total number of shares outstanding for the company, though no change in a shareholder's proportional ownership.
A stock split just increases the number of shares outstanding for a firm. The overall market capitalization or the total stockholders' equity does not change due to the stock split but the market price per share decreases.
In the example of a 2-for-1 split, the share price will be halved. Thus, while a stock split increases the number of outstanding shares and proportionally lowers the share price, the company's market capitalization remains unchanged.
The number of authorized shares can be increased by the shareholders of the company at annual shareholder meetings, provided a majority of the current shareholders vote for the change.
A stock split lowers its stock price but doesn't weaken its value to current shareholders. It increases the number of shares and might entice would-be buyers to make a purchase. The total value of the stock shares remains unchanged because you still own the same value of shares, even if the number of shares increases.
A stock split is a decision by a company's board to increase the number of outstanding shares in the company by issuing new shares to existing shareholders in a set proportion. Stock splits come in multiple forms, but the most common are 2-for-1, 3-for-2 or 3-for-1 splits.
Shareholders who wish to estimate the total number of shares that they will own after a stock split can use the following formula: Total number of shares post stock split = number of shares held * number of new shares issued for each existing share.