Wisniewski Inventions has 560,000 shares of stock outstanding at a market price of $3.90. If the firm declares a 2-for-7 reverse stock split, the company will have ____ shares outstanding at a market price of:

Question

Quizplus · Accepted Answer

In a 2-for-7 reverse stock split, for every 7 shares owned, shareholders will now own 2 shares. Therefore, the new number of shares = (2/7) * 560,000 = 160,000. The market price adjusts so the market capitalization remains the same, thus new price = old price * (old shares/new shares) = $3.90 * (560,000/160,000) = $13.65.

Wisniewski Inventions Has 560,000 Shares of Stock Outstanding at a Market