What Is a Reverse Stock Split?

Reverse stock split refers to reducing the number of shares issued by the company to at least a number of shares, and the proportion of shares held by shareholders is unchanged, which will not cause losses to shareholders. This is not as common as stock splits and usually only occurs when stock prices are low. This action will raise the nominal price of the stock, but it will not affect the value of the stock, because each reduced number of shares represents more ownership of the company, also known as "negative stock split".

Reverse stock split

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Reverse stock split refers to reducing the number of shares issued by the company to at least a number of shares, and the proportion of shares held by shareholders is unchanged, which will not cause losses to shareholders. This is not as common as stock splits and usually only occurs when stock prices are low. This action will raise the nominal price of the stock, but it will not affect the value of the stock, because each reduced number of shares represents more ownership of the company, also known as "negative stock split".

A stock split is also called a stock split, that is, a stock with a larger par value is split into several stocks with a smaller par value.

The stock split will not have any impact on the company's capital structure. Generally, it will only increase the total number of issued shares. The balance of each shareholder's equity account (equity, capital reserve, retained earnings) in the balance sheet will remain unchanged. The total amount of equity also remains unchanged.

The stock split does not bring real benefits to investors, but the number of stocks held by investors has increased, giving investors hope for more dividends and higher returns in the future, so stock splits are often more effective than increasing dividends. The stimulus effect of rising stock prices is even greater.

The effect of reverse division is to increase the price of the stock, which is exactly the opposite of the stock division. Investors can trade fewer shares in reverse splits.

Stock split ^[1]