Series 7 practice questioneasyEquity Securities — Reverse Split — Scenario
Why would a company most likely perform a reverse stock split?
- ATo increase the number of shares outstanding and make the stock more affordable
- BTo increase shareholder voting rights
- CTo pay off corporate debt
- DTo increase the per-share price to meet exchange listing requirements✓ Correct answer
Explanation
Why D — To increase the per-share price to meet exchange listing requirements
Companies perform reverse stock splits primarily to increase their per-share stock price. A common reason is to meet minimum price requirements for continued listing on major exchanges like NYSE or NASDAQ, which typically require a minimum share price (e.g., $1). A reverse split reduces the number of shares while proportionally increasing the price per share.
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