Definition

Noun: A corporate action that reduces the total number of a company's outstanding shares by consolidating them into a smaller number of proportionally more valuable shares, without changing the total market value of the company or the shareholders' equity.

Usage

A reverse stock split is typically undertaken to increase the per-share trading price of a company's stock. It is often implemented to meet minimum price requirements for stock exchange listings or to improve the stock's perception among investors.

Examples

• Noun:
  • The company announced a 1-for-10 reverse stock split to boost its share price above the exchange's minimum requirement.
  • After the reverse stock split, each shareholder received one new share for every five old shares they owned.

Advanced Usage

• "to undergo a reverse stock split": to experience this corporate action.
  • The struggling firm had to undergo a reverse stock split to avoid being delisted from the Nasdaq.

Variants and Related Words

• Reverse split (n): A common abbreviated term for "reverse stock split."
  • The board approved a reverse split to consolidate shares.
• Share consolidation (n): Another term for the same process, more common in some financial markets outside the U.S.
  • The share consolidation will take effect at the start of next month.

Synonyms

• Share consolidation: The act of combining shares.
• Stock consolidation: Another term for the same corporate action.

Related Terms and Concepts

• Stock split (n): The opposite action, where a company increases the number of outstanding shares, making each share proportionally less valuable.
  • While a stock split makes shares cheaper, a reverse stock split makes them more expensive.
• Outstanding shares (n): The total number of shares of a corporation that are currently held by all its shareholders.
• Shareholders' equity (n): The owners' residual claim on assets after debts have been paid; it remains unchanged in a reverse stock split.

Noun

1. a decrease in the number of outstanding shares of a corporation without changing the shareholders' equity