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In investing, what is a reverse stock split?
In investing, what is a reverse stock split?
Dimitris avatar
Written by Dimitris
Updated over a week ago

A reverse stock split, or stock merge, consolidates multiple shares in a given company to form a smaller number of more valuable individual shares.

For example, an investor who owns 10 shares valued at $1 each would only have one share after a reverse split of 10-for-1, but that 1 share will now be valued at $10.

Whilst a reverse stock split does not directly impact a company's value (only its share price), it can signal that a company is in distress, since it raises the value of otherwise low-priced shares. In extreme cases, a company may even need to use a reverse stock split to avoid being categorized as penny stock.

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