For questions related to the various forms of stock splits, reverse stock splits (share consolidations), etc.
In a standard stock split, a company increases its number of outstanding shares while adjusting the share price so that its market capitalization remains the same.
For example, if a company currently has 1,000 shares outstanding at a price of $20/share, the company's total market capitalization is $20 * 1,000 = $20,000. A 2-for-1 stock split, often written as 2:1, would involve the number of shares increasing to 2,000 outstanding and the price per share decreasing to $10/share. Although the number of outstanding shares has doubled, the market capitalization remains unchanged at $10 * 2,000 = $20,000.
In a reverse split, the number of outstanding shares is decreased. This means the price per share is increased, but the market capitalization remains the same. The main reason why this is done relates to the share price. Some stock exchanges have a minimum price per share. If they fall below that minimum price then they will be de-listed. The reverse stock split keeps them above the minimum.
When a reverse split is done, lets say every 10 pre-split shares is turned into 1 post-split share, if you owned less than 10 shares pre-split you will be given cash. If you owned more than 10 pre-split shares you will be given a mix of post-split shares and cash.
