Back to Launch Lingo™. “Reverse Stock Split” is a decrease in a Corporation’s Issued and Outstanding Shares, which causes a proportional increase in the related price per share. The relative Equity Ownership of the Corporation among the Stockholders would not change given that each Stockholder would own fewer shares of Common Stock after the Reverse Stock Split in proportion to its Equity Ownership immediately prior to the Reverse Stock Split.
A Public Company may use a Reverse Stock Split, for example, in order to increase its price per share and avoid delisting from its stock exchange (i.e., for failing to meet certain minimum price per share requirements).
See also Stock Split.
