The value of shares does not decrease in a reverse stock split. Here's why:
- Understanding Reverse Stock Splits: A reverse stock split is a corporate action where a company reduces the number of its outstanding shares by consolidating them into fewer shares, resulting in a higher stock price per share1.
- No Reduction in Value: The total value of your shares remains the same even after a reverse split. For example, if you owned 10,000 shares at $0.50 each, after a 1-for-10 reverse split, you would own 1,000 shares at $5.00 each. The total value of your shares, $5,000, remains unchanged12.
- Perceived Weakness: Reverse stock splits are sometimes seen as a sign of weakness, as companies may use them to artificially increase their share price to meet exchange listing requirements or to appear more attractive to investors. However, the value of the company and your shares does not actually decrease as a result of this action34.
In summary, the value of your shares does not decrease in a reverse stock split; instead, the number of shares and the price per share are adjusted, while the total value of your shares remains constant.