What is a 'Reverse/Forward Stock Split'

A reverse/forward stock split is a stock split strategy that includes the use of a reverse stock split followed by a forward stock split. A reverse/forward stock split is usually used by companies to cash out shareholders with a less-than-certain amount of shares. This is believed to cut administrative costs by reducing the number of shareholders who require mailed proxies and other documents.

BREAKING DOWN 'Reverse/Forward Stock Split'

For example, if a company declares a reverse/forward stock split, it could start by exchanging one share for 100 shares that the investor holds. Investors with fewer than 100 shares would not be able to do the split and would therefore be cashed out. The company would then do a forward stock split for 100 for 1, which will bring shareholders that were not cashed out to their original number of shares.

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RELATED FAQS
  1. Why do companies use reverse/forward stock splits?

    Companies will use reverse/forward stock splits mainly in an attempt to save future administrative costs. A reverse/forward ... Read Answer >>
  2. 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 >>
  3. Does a stock split lead to the gapping up/down of the stock?

    If a company splits its stock, there will be no gapping of the stock due to the split itself. A stock split does not materially ... Read Answer >>
  4. 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 >>
  5. 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 >>
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