Question

Popular Co. wants to decrease the market price of their common shares. Which action(s) would they...

Popular Co. wants to decrease the market price of their common shares. Which action(s) would they take to accomplish this?

A) Issue stock dividends

B) Enact a stock split

C) Enact a reverse stock split

D) Both A and B

E) Both A and C

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Homework Answers

Answer #1

D) Both A and B

Since both A) Issue stock dividends and B) Enact a stock split only increases the number of shares without any change in company's financials. Since, valuation of company remains same and number of shares increases, both the options lead to reduction of market price of share.

Reverse stock split works exactly opposite, number of shares reduce without any change in company's financials. Therefore, reverse stock split actually increases the market price of the stock.

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