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SIE: Equity Securities
SIE practice questionmediumStock Splits

How does a reverse stock split affect a shareholder’s total investment value?

  1. AThe number of shares decreases, but total value remains the same.✓ Correct answer
  2. BThe total investment value decreases.
  3. CThe number of shares and value both increase.
  4. DOnly the share price decreases.
Explanation

Why AThe number of shares decreases, but total value remains the same.

Reverse splits reduce shares and raise price so total value is unchanged. The other answers do not reflect a reverse split’s math.

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