Reverse stock split

The reverse stock split (including nominal increase; engl. Reverse split or stock split down) is the opposite of a stock split and the measure of a public company, which reduces the number of shares outstanding, thus the market price of the remaining shares will increase accordingly.

Background

A reverse stock split must be approved at the Annual General Meeting. On the one hand is a reverse stock split of a psychological nature, since nothing changes on the distribution of ownership and the total value of the corporation. The stock becomes more expensive in the market price, without any change in the company's equity.

On the other hand, there may be valid reasons that make a reverse stock split Required: If a company's shares at a very low exchange rates are more precisely below the nominal value of shares traded (so-called penny stocks ), it is prohibited under the German Stock Corporation Act, to issue new shares, as new may not be issued under the nominal value of existing shares.

The unification of preferred and common shares into a single class of shares ordinary shares may also be in the form of the reverse stock split. Alternatively, the preference shares may be converted into ordinary shares, being this a mostly relative translation is performed to establish the equivalence of benefits and strains.

Technical implementation

In the technical implementation of the existing shares at par value shares are canceled and replaced by shares with a nominal value higher but the same WKN, ISIN. When no-par shares, however, only the statutes of the corporation shall be adjusted accordingly and the number of shares decreased in the accounts of the shareholders.

Representation

After merging automatically generated charts are restated as if the share already, so no jump in the price development is becoming the new denomination visible. Otherwise, an observer or even a software could wrongly assume the price would have evolved in the context of increased purchases due to economic changes, which could lead to wrong decisions.