A consolidation of outstanding shares (authorized and issued shares) that is carried out by a company to cut down the number of shares on the market. For example, in a one for two (1:2) reverse split, an investor who holds 500 shares of a company’s stock at $10 before a reverse split will receive 250 shares at $20 after the reverse split. The result of a reverse stock split is fewer outstanding shares in a company and an increase in share price. Reverse stock splits are usually undertaken by a company to eliminate smaller shareholders (shareholders with small holdings).
It is also known simply as a reverse split or a split down.
