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. How is a company's market capitalization affected by a reverse stock split?

    Find out about reverse stock splits, why a company would use a reverse stock split and how a company's market capitalization ... 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 >>
  5. 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 >>
  6. What is a stock split? Why do stocks split?

    All publicly-traded companies have a set number of shares that are outstanding on the stock market. A stock split is a decision ... 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

    Understanding Stock Splits

    Find out how stock splits work and how they affect investors.
  3. 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. ...
  4. 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.
  5. Investing

    How To Profit From Stock Splits And Buybacks

    If stock splits and buybacks have been a bit of a mystery to you, you're not alone. Learn some great tips.
  6. Investing

    What Are Corporate Actions?

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

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  8. 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 ...
  9. Investing

    Should Chipotle Consider a Stock Split? (CMG)

    Learn why it might be good for Chipotle to enact a stock split. Discover why some investors are bearish on the company's prospects.
  10. Investing

    2 Key Concepts for All Investors

    Whether you’re a beginning or experienced investor, these weekly updates are designed to give you specific investment advice, including how to use financial ratios and other fundamental financia ...
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. Split Adjusted

    A modification made to a security's price that takes into consideration ...
  4. Reverse/Forward Stock Split

    A stock split strategy that includes the use of a reverse stock ...
  5. Closing Price

    The final price at which a security is traded on a given trading ...
  6. Split-Up

    A corporate action in which a single company splits into two ...
Hot Definitions
  1. Foreign Exchange Reserves

    Foreign exchange reserves are reserve assets held by a central bank in foreign currencies, used to back liabilities on their ...
  2. North American Free Trade Agreement - NAFTA

    A regulation implemented on Jan. 1, 1994, that decreased and eventually eliminated tariffs to encourage economic activity ...
  3. Trickle-Down Theory

    An economic idea which states that decreasing marginal and capital gains tax rates - especially for corporations, investors ...
  4. Derivative

    A security with a price that is dependent upon or derived from one or more underlying assets.
  5. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  6. Sharpe Ratio

    The Sharpe Ratio is a measure for calculating risk-adjusted return, and this ratio has become the industry standard for such ...
Trading Center