Which two of the following are the best justifications for a reverse stock split?
I.combine a reverse stock split with a stock repurchase to enable a firm to go dark
II.increase the respectability of the stock
III.avoid delisting
IV.reduce transaction costs for shareholders
A)I and II only
B)I and III only
C)II and III only
D)II and IV only
E)III and IV only

Question

Quizplus · Accepted Answer

Combine a reverse stock split with a stock repurchase to enable a firm to go dark is a valid reason for a reverse stock split, as it can reduce the number of outstanding shares and make the company less visible and easier to take private. Avoiding delisting is also a valid justification, as some stock exchanges have minimum stock price requirements, and a reverse stock split can increase the stock price and prevent delisting. Increasing the respectability of the stock and reducing transaction costs for shareholders are not strong justifications for a reverse stock split.

Which Two of the Following Are the Best Justifications for a Reverse