Reverse/Forward Stock Split

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DEFINITION of 'Reverse/Forward Stock Split'

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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