What Is a Reverse Stock Split?

Reverse stock splits allow a company to immediately raise its share price, but there's a catch.

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(Image credit: Getty Images)

A reverse stock split is a method used by public companies to immediately boost their share price. However, there are issues with reverse splits that investors need to be mindful of. This article will delve into the mechanisms and issues surrounding a reverse stock split. 

At the very basic level, a reverse stock split is the opposite of a stock split. And the best way to understand a stock split is to use an actual example. In mid-2022, Alphabet (GOOGL) completed a 20-for-1 stock split. Right before its shares were split, the price for a single share of GOOGL stock was roughly $2,250. After the split, the shares were priced closer to $110 apiece.

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Mark R. Hake, CFA
Contributing writer, Kiplinger

Mark R. Hake, CFA, is a Chartered Financial Analyst and entrepreneur. He has been writing on stocks for over six years and has also owned his own investment management and research firms focused on U.S. and international value stocks, for over 10 years. In addition, he worked on the buy side for investment firms, hedge funds, and investment divisions of insurance companies for the past 36 years. Lately, he is also working as Chief Strategy Officer for a tech start-up company, Foldstar Inc, based in Princeton, New Jersey.