4.10 (Reverse) Split


How the normal stock split works: for this example, we will use the Tesla stock split.  The popular electric car manufacturer Tesla divided its share price and ownership too. This meant that its previous sky-high price of 2,230 USD decreased to a more accessible price of 446 USD. Shareholders who previously held just one share now owned five. Despite the stock split, Tesla still holds the same value.

How the reverse split works: for example, in a one-for-ten (1:10) reverse split, shareholders receive one share of the company’s new stock for every 10 shares that they owned….. If an investor owns 1,000 shares each worth $1 before a one-for-10 reverse stock split, the investor would end up holding 100 shares worth $10 each after the split.

In general, reverse stock splits boost a company’s share price. A higher share price is usually good, but the increase that comes from a reverse split is mostly an accounting trick.  Whatever value it has is just distributed over fewer shares of stock, thus increasing the price.