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COVID-19 has caused many large-caps' stocks to tumble like Spirit, Husky Energy ($2.75). Why don't they reverse stock split to uplift their share prices? Here are some benefits of unsplitting:

  1. A high stock price can make the company look prestigious. E.g. A company trading at $1,000 per share will be perceived as more valuable even though the firm's market capitalization may be the same as a company whose shares trade at $50.

  2. Share values mustn't fall too low! There have been cases where companies have split shares only to see the stock market dive, pushing shares below $10. Psychologically, this may turn off some shareholders, and in extreme cases, share prices may be too low for a company to be listed on an exchange. Companies will avoid splitting to protect themselves from this possibility. Doubtless large caps wouldn't fancy themselves dropping to being a penny stock!

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    But if they're not too low to be listed on an exchange, share values don't really matter. You may as well ask why companies don't split/unsplit their stock every week to keep the price at exactly $20.
    – Criticizing Israel not allowed
    Commented Mar 19, 2020 at 16:25
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    And the answer is probably "they have no reason to..." If they do have a reason to, then they will.
    – Criticizing Israel not allowed
    Commented Mar 19, 2020 at 16:32
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    What do you expect increasing their share price that way will accomplish?
    – glibdud
    Commented Mar 19, 2020 at 16:54
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    There are two companies. A trades for $10 and B trades for $20. Is the $20 stock a better company because it has a higher share price? Or should you buy the company that has better financial prospects? Doing a stock split is costly. Many companies prefer not to waste money on this. Reverse stock splits tend to be done if a company is in danger of being delisted due to the minimum share price requirement of a stock exchange.
    – Bob Baerker
    Commented Mar 19, 2020 at 17:10
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    The people whose opinion of the company's strength actually matters won't have their opinion changed (for the better, anyway) by a reverse stock split.
    – chepner
    Commented Mar 20, 2020 at 12:53

3 Answers 3

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Why don't they reverse stock split to uplift their share prices?

Stock splits (and reverse-splits) are a zero-sum activity (minus what costs there are to actually implement the split). It's like trading 10 dimes for a dollar bill. The company is not worth any more or less after the fact. It used to be that a lower share price was desired since it would enable more investors that had to buy shares in 100-share lots. Nowadays, with index funds dominating the market, that benefit has largely gone away, which is why you see companies like Amazon and Apple decide not to split their shares that are worth hundreds or thousands of dollars per share.

A reverse split may be required in order to stay listed on exchanges, but it is often seen as a large negative signal, much like suspending a dividend.

So companies have no financial incentive to split or reverse split, but often have behavioral incentives not to reverse split.

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    I think it should really be a negative sum, at least to the company, as there is bound to be a cost to doing the paperwork.
    – jamesqf
    Commented Mar 19, 2020 at 18:02
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    I've been a part of 2 companies now that have done reverse splits, when the company isn't strong or something external doesn't change, the share price usually ends back up where it started in a short period of time anyway. So unless they have a really good reason, this just dilutes the value of the company. If it had 100,000 shares at $2/ea then reverse split to 50,000 shares at $4/ea, then the price drops back to $2/share the company is now objectively worth half.
    – Ron Beyer
    Commented Mar 20, 2020 at 0:39
  • @RonBeyer It does affect the par value. In some jurisdictions, for some share types a share holder can "claim" the par value against the company for liquidating his share(s). (callable common stocks) - but this is certainly a fringe example, I have not heard of any such example, only read about the concept. But, entertaining the idea - In such a case, repeated reverse splits will in the end bring the par value above market value, which would be a disaster for the company and it's debtors (the reasonable result would be a run to the bank to get par value before the company is sunk)
    – Stian
    Commented Mar 20, 2020 at 9:47
  • @jamesqf Good point. Added.
    – D Stanley
    Commented Mar 20, 2020 at 12:48
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My answer is: for what reason?

From your link: "Finance professors have examined stock splits and see no actual impact on a company’s value or performance."

It would follow that reverse stock splits are the same.

It does make sense to keep the share price above the minimum required for listing. In addition, it may make sense to keep the price within certain bounds to ensure a particular lot size.

The psychological argument is a bit dubious. If the share price goes up, that may inspire some (misinformed) people to sell, with the likelihood of driving the price down. If anything, splitting is more likely to provide a better psychological outcome as people don't want to part with shares when they are very low, and more inclined to buy them when they are at "bargain" prices.

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    If a company's share price has dropped precipitously and it's in danger of being delisted then it will do so in order to maintain the listing. However, the split doesn't change the fundamentals of the company. If it was financially troubled before the split, it's financially troubled after the split. And that's why the share price of such companies continues to drop.
    – Bob Baerker
    Commented Mar 20, 2020 at 5:47
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    @BobBaerker As I said: "It does make sense to keep the share price above the minimum required for listing."
    – Gregory Currie
    Commented Mar 20, 2020 at 5:53
  • As I said, a bad company before a reverse split is a bad company after the split. There's no psychology in that nor does it make people more inclined to buy the shares.
    – Bob Baerker
    Commented Mar 20, 2020 at 6:06
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    @BobBaerker The term psychological specifically means "of the mind", which means it doesn't have to make sense, there just has to be some sort of thought process (however valid) that leads to people acting a certain way. I personally don't believe it would have much of an impact on the share price, but was willing to entertain the OP's flawed logic. Did you read my answer at all? Maybe you meant to write your own answer.
    – Gregory Currie
    Commented Mar 20, 2020 at 6:21
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Maybe you are thinking of a buy-back?

It is another way to reduce the number of issued shares.

If a company has enough cash on hand, the company buys its shares back (but only from those who are wanting to sell).

If the share prices had fallen much below the book value, the company can actually increase the value of the remaining shares (and thus potentially the price)

Just by being a willing buyer it can prevent the share price from falling so far below the book value that it would be attractive to asset strippers.

The book value is pretty much the net asset value divided by the number of shares

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