1. What is a Reverse Stock Split?

A reverse stock split is a corporate action where a company reduces the number of its outstanding shares by combining multiple shares into one. This increases the share price proportionally while maintaining the same market capitalization.

2. How Does the Calculator Work?

The calculator uses the reverse stock split formula:

Where:

• \( \text{Shares} \) — Number of shares owned before the reverse split
• \( \text{Ratio} \) — Reverse split ratio (e.g., 1:10 ratio means 10 becomes 1)

Explanation: The formula calculates how many shares you'll have after a reverse stock split by dividing your current shares by the split ratio.

3. Importance of Reverse Stock Split Calculation

Details: Understanding how a reverse split affects your share count is crucial for portfolio management, tax planning, and evaluating the true impact of the corporate action on your investment.

4. Using the Calculator

Tips: Enter your current number of shares and the reverse split ratio. Both values must be positive numbers greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: Why do companies perform reverse stock splits?
A: Companies typically perform reverse splits to increase their share price, meet exchange listing requirements, or improve perception among investors.

Q2: Does a reverse split affect the total value of my investment?
A: No, the total value remains the same initially. While your share count decreases, the price per share increases proportionally.

Q3: What happens to fractional shares after a reverse split?
A: Most companies cash out fractional shares rather than issuing partial shares, paying you the cash value of any fractional share.

Q4: How does a reverse split affect options contracts?
A: Options contracts are adjusted to reflect the reverse split. The number of contracts may decrease while the strike price increases proportionally.

Q5: Are reverse splits generally positive or negative for investors?
A: Reverse splits are often viewed negatively as they're frequently used by struggling companies trying to avoid delisting, though sometimes they're used by healthy companies for strategic reasons.