{"id":13740,"date":"2026-05-27T07:30:11","date_gmt":"2026-05-27T07:30:11","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/glossary\/reverse-stock-split\/"},"modified":"2026-05-27T07:30:11","modified_gmt":"2026-05-27T07:30:11","slug":"reverse-stock-split","status":"publish","type":"glossary","link":"https:\/\/lemonn.co.in\/blog\/glossary\/reverse-stock-split\/","title":{"rendered":"Reverse Stock Split: Meaning, Reasons, and Impact"},"content":{"rendered":"

Reverse Stock Split<\/a>: What It Means for Investors<\/h1>\n

A reverse stock split reduces the total number of a company’s shares<\/a> while raising the price per share by the same ratio. If you hold ten shares before a 1:10 reverse split, you will hold one share after it. The value of your investment stays the same on the split date.<\/p>\n

This guide explains how a reverse stock split works, why companies use it, and what investors should watch.<\/p>\n

What Is a Reverse Stock Split?<\/h2>\n

A reverse stock split is the opposite of a regular stock split. Instead of dividing each share into more units, the company combines several shares into one.<\/p>\n

The ratio explains the change. For example, in a 1:5 reverse split, every five shares become one share. The price per share rises five times to keep the total value the same.<\/p>\n

Why Companies Use a Reverse Stock Split<\/h2>\n

Companies do not use this action often, but it serves a clear purpose when they do. Common reasons include:<\/p>\n

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  1. To meet minimum price rules of a stock exchange<\/a><\/li>\n
  2. To improve the image of the share price<\/li>\n
  3. To attract institutional buyers who avoid low-priced stocks<\/a><\/li>\n
  4. To support corporate restructuring<\/li>\n<\/ol>\n

    A very low share price can hurt a company’s perception. A reverse split brings the price to a more standard range.<\/p>\n

    Example of a Reverse Stock Split<\/h2>\n

    Suppose you own 1,000 shares of a company at ₹5 each. Your investment is worth ₹5,000. The company announces a 1:10 reverse split.<\/p>\n

    After the split:<\/p>\n