A reverse stock split is a corporate action that reduces the number of outstanding shares by a defined ratio while proportionally increasing per-share value. A 1-for-10 reverse split converts ten $0.10 shares into one $1 share, maintaining market capitalization and ownership percentages but consolidating share counts, used at public companies to maintain exchange listing requirements ($1 minimum bid) and at private companies during recapitalizations. It is economically neutral at the company level but often signals financial distress at public companies and structural restructuring at private companies.
The mechanic of a reverse stock split: