Definitions for reverse stock split
This page provides all possible meanings and translations of the word reverse stock split
reverse split, reverse stock split, split down(noun)
a decrease in the number of outstanding shares of a corporation without changing the shareholders' equity
Reverse stock split
On a stock exchange, a reverse stock split or reverse split is a process by a company of issuing to each shareholder in that company a smaller number of new shares in proportion to that shareholder's original shares that are subsequently canceled. A reverse stock split is also called a stock merge. The reduction in the number of issued shares is accompanied by a proportional increase in the share price. New shares are typically issued in a simple ratio, e.g. 1 new share for 2 old shares, 3 for 4, etc. A reverse split is the opposite of a stock split. Typically, the stock will temporarily add a "D" to the end of its ticker during a reverse stock split. Sometimes a company may concurrently change its name. This is known as a name change and consolidation. There is a stigma attached to doing a reverse stock split, so it is not initiated without very good reason and may take a shareholder or board meeting for consent. Many institutional investors and mutual funds, for example, have rules against purchasing a stock whose price is below some minimum, perhaps US$5. In an extreme case, a company whose share price has dropped so low that it is in danger of being delisted from its stock exchange, might use a reverse stock split to increase its share price. For these reasons, a reverse stock split is often an indication that a company is in financial trouble.
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"reverse stock split." Definitions.net. STANDS4 LLC, 2016. Web. 7 Feb. 2016. <http://www.definitions.net/definition/reverse stock split>.