Question

Lay's Meat Market has 795 shares of stock outstanding at a price per share of $1.11. What will the price per share be if the firm declares a 5-for-25 reverse stock split?

Answer 1

No of shares outstanding= 795

Price per share before reverse stock split = 1.11$
reverse stock split ratio = 5 For 25

ie 1 for 5

no of shares outstanding after reverse stock split =795/5 = 159 shares

so price per share be if the firm declares a 5-for-25 reverse stock split = 1.11 *5 = 5.55

A reverse stock split is a type of corporate action which consolidates the number of existing shares of stock into fewer, proportionally more valuable, shares. The process involves a company reducing the total number of its outstanding shares in the open market, and often signals a company in distress.