Reverse Stock Split Definition

The opposite of a forward stock split is called a reverse stock split. It is issued by companies with very low stock prices, often going below $1, to avoid getting delisted from the market. It works by merging several shares into a single share, in an attempt to increase the price for each. For example, a 1-for 10 reverse split which is originally priced at $0.50 each can become $5 after the split. A reverse stock split may also be issued in an effort to reduce the stock‚Äôs volatility and discourage spectator trading.