Trading, Accounts & Prohibited ActsQuestion 195 of 398
A company with shares trading at $2 declares a 1-for-10 reverse stock split. What happens to an investor holding 1,000 shares?
a.The investor holds 100 shares worth about $20 each
b.The investor holds 10,000 shares worth about $0.20 each
c.The investor holds 1,000 shares worth about $20 each
d.The investor holds 100 shares worth about $2 each
Explanation
A 1-for-10 reverse split reduces share count tenfold and multiplies the price tenfold, leaving total value unchanged. The 1,000 shares become 100 shares priced near $20, still worth about $2,000. Reverse splits are often used to raise a low share price.
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