1. What is a 1:10 Reverse Stock Split?

A 1:10 reverse stock split is a corporate action where a company reduces the number of its outstanding shares by converting every 10 shares into 1 share. 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:

• Old Shares — Number of shares before the reverse split
• Old Price — Price per share before the reverse split
• New Shares — Number of shares after the reverse split
• New Price — Price per share after the reverse split

Explanation: The reverse split reduces the number of shares outstanding while increasing the price per share proportionally, keeping the total market value unchanged.

3. Importance of Reverse Stock Split Calculation

Details: Understanding reverse stock splits is crucial for investors to accurately track their portfolio value, calculate position sizes, and assess the impact of corporate actions on their investments.

4. Using the Calculator

Tips: Enter the number of shares you own before the split and the pre-split price per share. The calculator will automatically compute your new share count and the adjusted price per share.

5. Frequently Asked Questions (FAQ)

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

Q2: Does a reverse stock split affect my investment value?
A: No, the total value of your investment remains the same. You own fewer shares, but each share is worth proportionally more.

Q3: What happens to fractional shares?
A: Most companies cash out fractional shares at the pre-split price rather than issuing fractional post-split shares.

Q4: How does a reverse split affect options contracts?
A: Options contracts are adjusted to reflect the reverse split. The number of contracts may change, and the strike price is adjusted accordingly.

Q5: Are reverse splits a positive or negative signal?
A: Reverse splits are often viewed negatively as they can indicate a company is struggling to maintain its share price, though sometimes they're used for legitimate corporate restructuring.