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60 Seconds: What Is a Reverse Stock Split?

Alright, it's time for some investing education. What is a reverse stock split and why should investors care? A reverse stock split is when a company reduces the number of its shares outstanding. This means that shares of the company will become more valuable because there are less of them. It is the opposite of a common stock split, where a company will have more shares, but those shares are not as valuable. There are a number of reasons why a company may be considering a reverse stock split, but one of the most popular reasons is for a company to avoid delisting on an exchange. This means that an exchange--such as the New York Stock Exchange or NASDAQ--would remove a company from the exchange that the company trades on. The New York Stock Exchange has a rule that a company that trades under $1.00 will be delisted after 30 days. But, there are other reasons for a company to go through a reverse stock split. On Monday, May 20, Blue Apron announced that it is planning to pursue a reverse stock split. The company will have shareholders vote on the proposal during Blue Apron's June 13 investor meeting. Related: Why Investors Should Listen to Earnings Calls

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