Asked by Jordan Prather on Jun 05, 2024
Verified
To reduce transaction costs for shareholders is a valid reason for a reverse stock split.
Reverse Stock Split
A corporate action where a company reduces the number of its existing shares to increase the per-share price, consolidating the shares at a specified ratio (e.g., 1 for 10), without changing the company's market capitalization.
Transaction Costs
Expenses incurred when buying or selling a good or service, which may include broker fees, commissions, and other charges.
- Acquire insight into the strategic justifications for stock splits, reverse stock splits, and share repurchase activities.
Verified Answer
ZK
Zybrea KnightJun 07, 2024
Final Answer :
False
Explanation :
A reverse stock split is primarily done to increase the per-share price of a stock, often to meet minimum share price requirements of stock exchanges, and not specifically to reduce transaction costs for shareholders.
Learning Objectives
- Acquire insight into the strategic justifications for stock splits, reverse stock splits, and share repurchase activities.