Of the following, which two are the best reasons for doing a reverse stock split? I. return a stock to its normal trading range
II) eliminate small shareholders
III) reduce shareholder costs
IV) avoid delisting

Question

Quizplus · Accepted Answer

The best reasons for doing a reverse stock split are to eliminate small shareholders and to avoid delisting. By eliminating small shareholders, a company can reduce administrative costs and simplify its shareholder base. Avoiding delisting is important because once a company is delisted from a major stock exchange, it can be more difficult to attract new investors and access capital markets. Returning a stock to its normal trading range and reducing shareholder costs are potential benefits but not the primary reasons for doing a reverse stock split.

Of the Following, Which Two Are the Best Reasons for Doing