What does reverse stock split means?

Hi Zachary,

A reverse stock split is a coporate action whereby the number of shares you hold will be consolidated into a smaller number, but their value goes up.

Think of it as exchanging 5 $10 dollar notes for a single $50 dollar bill. You still have $50 dollars, but only one note now. Nothing else has changed. This is considered a 5:1 consolidation.

This may have the effect of making the stock appear to be worth more, but liquidity will also have dropped. This did happen with Noble group shares back in 2018, if you are looking for a recent example.

Opposite of a split would be a merge. It is a type of coporate action to consolidate the number of existing shares into fewer but more valuable shares.

For example, I have 200 shares of ABC Company at $5. The company can do a reverse split 2:1 and I will end up with 100 shares at about $10.

For investors, nothing really changes (price increase could make it inaccessible to a minority). SGX has a minimum trading price rule and if companies cannot meet, they can be delisted.