Business and Personal Finance Dictionary

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• REVERSE STOCK SPLIT
  
  If a company's stock is trading at a very low price, the company may decide to reduce the number of outstanding shares and increase their price by consolidating the shares. For example, a 1-for-2 reverse stock split halves the number of existing shares and doubles the price. In that case, if you hold 100 shares of a stock selling at $5 a share, for a combined value of $500, in a 1-for-2 reverse stock split, you would own 50 shares valued at $10 a share, which would still give you a combined value of $500. Stocks may be reverse split 1-for-5, or 5-for-10, or in any ratio the company chooses. Reverse splits are generally used to discourage small investors or to encourage institutional investors, who may not buy stocks priced below a specific point.
  
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