A reduction in a company’s outstanding share counts, which results in an increase in the value of each share. If a 1-for-10 reverse split is executed on 100,000 shares currently priced at $10, the new share count is 10,000 and the share price is $100. There is no change to market capitalization. Companies traditionally execute reverse splits to make the share price more attractive to institutional investors that do not buy penny stocks or small cap stocks. Stocks below $1 often implement a reverse split as a last resort to avoid delisting from a major stock exchange.
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