What Is a Reverse Stock Split?

A reverse stock split combines multiple existing shares into fewer shares, raising the price of each remaining share in proportion. A 1-for-10 reverse split turns every 10 shares into 1, at roughly ten times the prior price, without changing the total value of a shareholder's position or anything about the underlying business.

How it works#

Reverse split ratio = old shares / new shares

Say an investor holds 300 shares trading at $0.80 each, a position worth $240. After a 1-for-30 reverse split, that holding becomes 10 shares at roughly $24.00 each, still worth about $240. Total shares outstanding across the company fall by the same ratio, so a company with 300 million shares before a 1-for-30 split has about 10 million afterward.

This is the exact opposite mechanic of an ordinary stock split, which turns one share into several at a lower price each; a reverse split runs the same arithmetic backward.

Nasdaq's own compliance process gives a company time before a reverse split becomes the only option: a stock trading below $1.00 typically gets an initial 180-day period to regain compliance on its own, sometimes followed by a second 180-day period, before the exchange moves toward delisting. A reverse split is often the tool a company reaches for once that clock is running out and the price has not recovered on its own.

A real example#

Beyond Meat completed a 1-for-30 reverse stock split effective 2026-08-13, with shares trading split-adjusted from 2026-08-14. The company stated the move was intended to bring its share price back above Nasdaq's $1.00 minimum bid price requirement, the listing rule most reverse splits in the US are designed to satisfy.

Ratios vary by how far a stock has fallen and how much room a company wants above the compliance threshold. Service Properties Trust, a hotel real estate investment trust, completed a smaller 1-for-5 reverse split the same summer, effective 2026-07-06; its own SEC filing recorded the mechanics of the transaction without stating a specific reason, a reminder that the ratio and the filing itself are the two places to check rather than assuming every reverse split shares the same motive.

What this means for a shareholder#

A reverse split changes nothing about revenue, profit or assets on the day it happens, so it is worth treating as a symptom rather than a cause: whatever pushed the share price low enough to risk delisting is the actual issue, and the split itself is the company's mechanical response to it. A reverse split combined with an improving business is a very different situation from one used to buy time around a business that continues to struggle.

The share count falling by the split ratio also means per-share figures like EPS rise by roughly that same ratio, purely from the smaller denominator, exactly as a company's own market capitalization is unaffected by the transaction even though the per-share price changes sharply. A higher nominal share price after the split can also open the stock to institutional investors and funds whose own rules exclude shares trading below a set price, a practical benefit separate from the exchange's own compliance requirement.

Related terms#

The stock behavior around a reverse split is a case where reading past the headline number matters: the transaction is noise about a company's presentation of its own shares, and the signal worth tracking is why the price fell far enough to need one. Checking a company's own SEC filing announcing the split, rather than a secondhand summary, is the only reliable way to learn the stated reason and the exact ratio.