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For example, in a one-for-ten (1:10) reverse split, shareholders receive one share of the companys new stock for every 10 shares that they owned. In other words, a shareholder who held 1,000 shares would end up with 100 shares after the reverse stock split was complete.
The par value (face value) of a security will never change. For instance, a bond issued at par of $1,000 will always pay that amount upon its maturity.
Stock splits are generally done when the stock price of a company has risen so high that it might become an impediment to new investors. Therefore, a split is often the result of growth or the prospects of future growth, and its a positive signal.
Reverse stock splits occur when a publicly traded company deliberately divides the number of shares investors are holding by a certain amount, which causes the companys stock price to increase accordingly. However, this increase isnt driven by positive results or changes to the company.
Reverse stock splits are not governed by the U.S. Securities and Exchange Commission (SEC) like other corporate actions. Generally, the split must be approved by either the board of directors or shareholders, depending on the companys bylaws and state corporate law.

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Shareholders do not lose money on a reverse stock split. The move consolidates the number of shares in existence, but the total value of the shares remains the same.
The market cap following the stock merger is the new number of total shares times the new price per share, which is also $50 million ($25 x 2 million). The factor by which the companys management decides to go for the reverse stock split becomes the multiple by which the market automatically adjusts the share price.
The par value of the Common Stock will remain at $0.01 per share following the Reverse Stock Split, and the number of shares of the Common Stock outstanding will be reduced.
A company may declare a reverse stock split in an effort to increase the trading price of its shares for example, when it believes the trading price is too low to attract investors to purchase shares, or in an attempt to regain compliance with minimum bid price requirements of an exchange on which its shares trade.
If this company pays stock dividends, the dividend amount is also reduced due to the split. So, technically, theres no real advantage of buying shares either before or after the split.

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