Why do companies execute reverse stock splits?

Question

Why do companies execute reverse stock splits?

Answer 1

When the price of a stock is too low to be attractive to new investors, the board of a company will often do a reverse stock split to make it more attractive to new investors.

Some people won't buy a stock under $5 per share. So if a stock is $1 per share and the board oks a reverse stock split, for example, the price will go to $6 per share , every 600 shares you own will go down to 100 shares but the price will go from $1 ( x 600 = $600) to $6 per share ( x 100 shares = $600). Your value has not changed but now the stock looks better to some potential investors.

Answer 2

They do it in order to get the price up so it isnt a penny stock.  So it looks more appealing to investors.  And to avoid being delisted from an exchange.  If a stock price drops too low for a period of time, it can get delisted from an exchange.

Answer 3

It's just a ploy to make their stock LOOK more appealing. It doesn't change anything just the look.

Answer 4

Because their stock has gotten to such a low price that is is just a better selling tool to reverse split the stock.  I would be real careful before I invested in any reverse splits