What is the difference between a stock split and a reverse stock split?

What is the difference between a stock split and a reverse stock split Introduction: The Fascinating World of Stock Market Hello, and welcome to another insightful video on the stock market. Today, we'll be diving deep into the intriguing concepts of stock splits and reverse stock splits. These events often make headlines and can significantly impact a company's stock. So, let's get started! Stock Splits: Doubling the Shares, Halving the Price A stock split is a corporate action where a company divides its existing shares into multiple shares. The most common ratio is 2:1, meaning for every share you own, you'll receive two. The primary objective of a stock split is to reduce the share price, making it more affordable for retail investors. However, the total market capitalization remains unchanged. For instance, if you had 100 shares priced at $100 each before a 2:1 split, you'd end up with 200 shares priced at $50 each. The overall value of your investment remains the same. Reverse Stock Splits: Consolidating Shares, Increasing Value On the other hand, a reverse stock split is the opposite of a regular stock split. Here, a company reduces the number of outstanding shares by a specific ratio, often 1:10 or 1:5.