In recent years Constable Inc. has suffered losses, and its stock currently sells for only $0.50 per share. Management wants to use a reverse split to get the price up to a more "reasonable" level, which it thinks is $25 per share. How many of the old shares must be given up for one new share to achieve the $25 price, assuming this transaction has no effect on total market value?

Question

Business

Ezequiel Bowman

4 December, 06:17

In recent years Constable Inc. has suffered losses, and its stock currently sells for only $0.50 per share. Management wants to use a reverse split to get the price up to a more "reasonable" level, which it thinks is $25 per share. How many of the old shares must be given up for one new share to achieve the $25 price, assuming this transaction has no effect on total market value?

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Davis Fox · Answer 1

Total value of the new share = total value of old share

Given that total value of old share = $25

Number of shares * Price per share = 43

Also, given that price per share is $0.50, number of shares = 25/0.5 = 50

Number of Old shares must be give up for one new share to achieve the $25 price is 50 Shares.