A company wants to maintain a stock price around $16 a share. Due to a recent market downturn, the stock is currently selling for $6 a share. The company should consider a ________ stock split.
A) 3-for-1
B) 4-for-1
C) 1-for-3 reverse
D) 1-for-4 reverse
E) 1-for-5 reverse

Question

Quizplus · Accepted Answer

A 1-for-3 reverse stock split means for every 3 shares someone owns, they are combined into 1 share. This would increase the price of each share, which is necessary when the current price is significantly lower than the desired price. If the stock is at $6, a 1-for-3 reverse split would theoretically triple the price per share, bringing it closer to the $16 target.

A Company Wants to Maintain a Stock Price Around $16