A company that announces reverse stock split is really in big trouble. Examples of reverse stock split (announced or executed) like AIG, Citigroup, GM, AT&T, Lucent, Cypress Comm. etc tell only slightly different stories of reverse stock split consequences.
As you know a reverse stock split for a company reduce its number of shares traded on the exchange. As a result it impacts the shareholder more than any one else related to the company. Unlike the normal stock split, reverse stock split is seen as a bad sign for the shareholder.
A Reverse stock split is not a term commonly heard in the stock market. You could be hearing about straight ‘stock split’s that increase the number of shares after the event. But once in a while companies announce a Reverse Stock Split in a plan to solve some problems.
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