Reverse Stock Split
A corporate action in which a company reduces its total number of outstanding shares by consolidating multiple existing shares into a single share, increasing the per-share price proportionally.
Full Definition
A reverse stock split (also called a 'share consolidation' outside the US) reduces the share count in a set ratio — such as 1-for-10, converting every ten shares into one — while proportionally increasing the share price. Reverse splits are often executed to regain compliance with exchange minimum price listing requirements. Transfer agents process reverse splits by adjusting the shareholder register and handling fractional share entitlements, which are typically paid in cash. Editors must not use 'reverse stock split' interchangeably with 'stock split' and should verify the ratio direction (1-for-N vs. N-for-1) very carefully, as errors can mislead investors.
Usage
Usage note: The ratio for a reverse split is expressed as '1-for-N' (e.g., '1-for-10'). Never reverse the ratio direction; verify carefully before publication.
In Context
- "As a result of the 1-for-10 reverse stock split, each holder of ten shares received one share of the consolidated stock." — Corporate action notification to registered holders
- "The company effected a reverse stock split to regain compliance with the NYSE minimum bid price requirement." — Form 8-K filing