When a publicly traded company undergoes a reverse stock split, the company cancels outstanding stock and issues new shares to existing shareholders. Existing shareholders receive the same value in stocks, but the number of shares changes based on the reverse stock split ratio.
For example, in a 1-for-10 reverse split (1:10), shareholders’ total shares would be divided by 10. If you owned 1,000 shares of a company, after a 1:10 split you would then own 100 shares, but the dollar value would remain unchanged.
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