Reverse Stock Split Meaning | Reverse Stock Split Examples
In simple words reverse stock split which is exactly opposite to stock split under which reduce the number of companies outstanding shares in a share market by company's board of directors up to certain level.
What happens When Reverse Stock Splits ?
After the reverse stock split it will decrease the companies number of outstanding share and which impacts the price of those outstanding per share value increase
Reverse Split Stock Example
The decision of a reverse stock split is taken by a company's board of directors which decrease the companies number of outstanding share and which impacts the price of those outstanding per share value increase.
Suppose consider an example for 2:1 reverse stock split in which an investor would receive 1 share for every 2 shares that they have in their portfolio whereas under stock split 2:1 investor receives two shares after the split for every share they owned before the split
Lets assume that a company issued 50 shares for a market value of Rs.30 per share
Now market value is (50 x 30 = 1500)
Now company reverse splits in the ratio 2:1 after reverse splits now 25 shares of stock and The price of each share is adjusted to ( Rs 60 = 1500 / 25 )
The market value of shares is (25 × 60 = 1500 ), the same as before the split.
Why company's prefer opt for Reverse stock split : -
1 Boost the share price
2 Prevent themselves for delisting of its shares by the stock exchange
3 Build company Goodwill
4 Attract Large Investors
Conclusion :-
Now you clearly understand that Reverse Split Stock meaning and example. In case still you have any doubt you can just comment below.
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