A:

A reverse split is a corporate action whereby a company reduces the number of shares outstanding and increases the price of its stock. A company may decide to use a reverse split to shed its status as a penny stock, or to avoid being delisted. A common type of reverse stock split is 1:2, which means that each investor receives one share for every two that he or she already holds. In other words, the investor gets half as many shares, but they're worth twice as much as before.

As the question states, a company that has undergone a reverse stock split often gets the letter "D" attached to the end of its ticker symbol. This letter is used to designate a company that is undergoing a stock split of some sort (most often a reverse split), or some form of corporate reorganization. This letter is generally attached to the end of the ticker for approximately 20 trading days before it's removed.

For further reading, see Understanding The Ticker Tape, What Are Corporate Actions? and Understanding Stock Splits.

RELATED FAQS
  1. Why would a company perform a reverse stock split?

    Understand what a reverse stock split entails, and learn what the common motivations are for a company to perform a reverse ... Read Answer >>
  2. What are reverse stock splits?

    A reverse stock split is a corporate action in which a company reduces the number of shares it has outstanding by a set multiple. ... Read Answer >>
  3. What is the effect of a reverse split on the stock's value?

    Find out more about reverse stock splits, how to calculate a reverse stock split and how a reverse stock split affects a ... Read Answer >>
  4. How and why does a stock split?

    Learn why stock splits do not occur very often for individual stocks, and understand the impact of reverse stock splits on ... Read Answer >>
Related Articles
  1. Investing

    Understanding Stock Splits

    We explain what they are, the thinking behind them as well as their results.
  2. Investing

    Berkshire's Stock Splits: Good Buy Or Goodbye?

    Warren Buffett's Berkshire Hathaway recently split its stock. Is this a sign to buy?
  3. Investing

    What Are Corporate Actions?

    Corporate actions are processes that change a company’s stock. Here are a few examples.
  4. Investing

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  5. Investing

    Don't Let Stock Prices Fool You

    Find out why a stock with a six-figure share price can still be a good value.
  6. Investing

    Stock Splits: A Closer Look At Its Effects

    Most trades, including short sales and options, aren't materially affected by a stock split. Still, it's important for shareholders to understand how these events impact various aspects of investing. ...
  7. Investing

    If You Had Invested Right After Amazon's IPO

    Find out how much you would have made if you had invested $1,000 during Amazon's IPO, including how the power of the stock split affects investment growth.
  8. Investing

    Galena Declares 1-for-20 Reverse Split (GALE)

    Galena’s 1-for-20 reverse stock split goes ex-today, which will bump the share price by a factor of 20.
  9. Investing

    Do Stock Splits Cause Volatility?

    Since stock splits decrease the stock price, do they also increase volatility because shares are traded in smaller increments? Investopedia examines assumptions about this increasingly common ...
  10. Investing

    GTx Declares 1-For-10 Reverse Stock Split (GTXI)

    Nasdaq’s minimum $1-per-share bid requirements for continued listing has forced GTx to declare a reverse stock split.
RELATED TERMS
  1. Reverse Stock Split

    A corporate action in which a company reduces the total number ...
  2. Stock Split

    A corporate action in which a company divides its existing shares ...
  3. Reverse/Forward Stock Split

    A stock split strategy that includes the use of a reverse stock ...
  4. Split Adjusted

    A modification made to a security's price that takes into consideration ...
  5. Split-Up

    A corporate action in which a single company splits into two ...
  6. A-B Split

    A method of testing the effectiveness of marketing methods or ...
Hot Definitions
  1. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity. ...
  2. Free Cash Flow - FCF

    A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents ...
  3. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  4. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  5. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  6. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
Trading Center