Quicktake
Most investors are familiar with stock splitting, which happens when a publicly traded company with a high stock price divides its shares to cut their price in the market without fundamentally altering the company’s value. But there’s also a reverse maneuver for firms with share prices so low that exchanges could threaten delisting — a “reverse stock split.” In August, WeWork Inc. said it would conduct one, issuing one new share for every 40 shares outstanding. The move came after the stock fell to as low as 11 cents, jeopardizing its listing on the New York Stock Exchange.
Any listed company that fails to maintain a stock price of at least $1 for 30 days can prompt a notice that it’s at risk of being delisted by the New York Stock Exchange or Nasdaq. Keeping a listing on a major exchange is crucial for a stock to retain broad investor interest and attract enough buyers and sellers to stay liquid in the market. WeWork literally said that its 1-for-40 reverse split was designed to regain compliance with listing requirements.
