Which one of the following is the best justification for a reverse stock split?
A) Improve the stock's respectability
B) Avoid delisting
C) Reduce transaction costs for shareholders
D) Improve the stock's liquidity
E) Increase the par value per share

Question

Quizplus · Accepted Answer

A reverse stock split is often used to avoid delisting, which can occur if a company's stock price falls below the minimum listing requirements of the exchange on which it is listed. By reducing the number of outstanding shares, a reverse stock split increases the stock price, potentially helping the company avoid delisting. The other justifications listed may also be considerations for a reverse stock split, but avoiding delisting is typically the primary reason.

Which One of the Following Is the Best Justification for a Reverse