FOXO Technologies' Reverse Stock Split: A Desperate Move or a Strategic Rebirth?

In the annals of corporate survival, few maneuvers are as polarizing as the reverse stock split. For distressed firms, it is often a last-ditch effort to avoid delisting. For investors, it is a signal—ambiguous at best, ominous at worst. FOXO Technologies (NYSE American: FOXO) has executed two such splits in 2025, first a 1-for-10 in April and then a 1-for-1.99 in July, both to comply with NYSE American's $0.10 minimum share price requirement. But is this a calculated rebirth or a desperate act of denial?

The Academic Lens: Reverse Splits and Investor Sentiment

Academic research paints a grim picture of reverse stock splits, particularly for tech firms. Studies over the past decade show that firms undertaking reverse splits typically experience negative abnormal returns in the long term. For instance, Kim et al. (2008) found that three-year post-split returns for such firms averaged -33.90%, while Desai and Jain (1997) noted one-year returns of -10.76%. These declines are not mere statistical anomalies; they reflect investor skepticism.

Why? A reverse split is often a signal of desperation. When a company reduces its shares to inflate the price per share, it rarely addresses the root causes of its distress—declining revenues, poor operational performance, or eroding margins. Instead, it signals to the market that the firm is struggling to maintain its listing status. This triggers a cascade of negative implications:

1. Erosion of Trust: Investors perceive reverse splits as a sign that management is prioritizing survival over substance. A 2023 study in the Journal of Financial Economics found that firms with reverse splits saw a 20% drop in institutional ownership within six months, as professional investors exited riskier positions.
2. Liquidity Deterioration: Post-split, trading volumes often shrink, and bid-ask spreads widen. This is particularly damaging for tech firms, which rely on liquidity to attract new capital.
3. Repeated Splits as a Death Knell: Firms that execute multiple reverse splits are often on a path to delisting. A 2024 study revealed that 65% of companies with two or more reverse splits within five years ended up delisted or bankrupt.

FOXO's second reverse split in July 2025—its second in 12 months—falls squarely into this category. While the company claims the move is “business-as-usual,” the academic consensus is clear: repeated splits are rarely a harbinger of recovery.

Operational Performance: A Mirror of Desperation

The operational performance of distressed tech firms post-reverse split is equally bleak. A 2021 analysis of 1,206 firms found that only 29% survived five years post-split, with the median survival period just 22 months. Most failures came in the form of bankruptcy or delisting. For tech firms, where innovation and growth are paramount, this is a death sentence.

FOXO's case is illustrative. The company's 1-for-1.99 split in July 2025 raised its share price from ~$0.05 to ~$0.10, but this cosmetic improvement does little to address underlying challenges. Its revenue has declined for five consecutive quarters, and its cash burn rate remains unsustainable. Without a clear path to profitability or a strategic pivot, the reverse split is a temporary fix at best.

Strategic Rebirth or Desperation Play?

The line between a strategic rebirth and a desperate play is thin. Consider the case of Eros International (EROS), which executed a 1-for-15 reverse split in 2020 and used the renewed capital to fund content production, eventually stabilizing its business. In contrast, Parkervision (PRKR) delisted after a 1-for-10 split in 2022, with no meaningful operational turnaround.

FOXO's management claims the reverse split will “enhance shareholder value,” but this ignores a critical question: What is the value being enhanced? If the firm lacks a credible growth strategy, a higher share price is just a facade.

Investment Advice: Proceed with Caution

For investors, the lesson is clear: reverse splits are not a silver bullet. While they may temporarily stabilize a stock price, they rarely fix the operational or financial issues that led to the split in the first place. Here's how to approach FOXO and similar cases:

1. Scrutinize Fundamentals: Look beyond the share price. Are there signs of operational improvement, such as cost-cutting, revenue diversification, or strategic partnerships?
2. Assess Liquidity Risk: Post-split, trading volumes may plummet. If liquidity dries up, even a well-intentioned investment could become illiquid.
3. Compare to Peers: How does FOXO's post-split performance stack up against other distressed tech firms? Use tools like to gauge relative risk.

In the end, the reverse stock split is a double-edged sword. For FOXO, it may buy time but not a solution. For investors, it is a red flag demanding closer inspection. The market's long-term verdict on such maneuvers has been consistent: desperation rarely masquerades as strategy for long.