Question

Timothy owns 780 shares of Countess Corp., which is priced at $14.01 per share. The company plans a 3-for-4 reverse stock split. How many shares will Timothy own and what will the share price be after the reverse stock split?

Answer 1

Compute the shares outstanding after reverse stock split, using the equation as shown below:

Shares outstanding = Existing shares*Reverse stock split ratio

                                = 780 shares*3/4

                                = 585 shares

Hence, the shares outstanding after the reverse stock split is 585 shares.

Compute the share price after reverse stock-split, using the equation as shown below:

Share price = Existing share price/Reverse stock-split ratio

                   = $14.01/ (3/4)

                   = $14.01/75%

                   = $18.68

Hence, the share price after the stock split is $18.68.