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Consolidation of a stock, also known as a reverse stock split, is a corporate action in which a company reduces the total number of its outstanding shares, while proportionally increasing the share price. The total market value of the company's shares remains the same, but each individual share is worth more.Here's an example to illustrate:- Suppose a company has 1,000,000 shares outstanding, each trading at $1. After a 1-for-10 consolidation, it will have 100,000 shares outstanding, each trading at $10.### Key Points:1. **Purpose**:- Improve stock price to meet minimum exchange listing requirements.- Enhance the company's image and appeal to institutional investors.- Reduce the number of shareholders, simplifying corporate actions.2. **Effects**:- No change in overall market capitalization.- Shareholders hold fewer shares, but each share has a higher value.- Potential improved perception of the company's stock.3. **Process**:- Approved by the company's board and sometimes by shareholders.- Exchange ratio determined (e.g., 1-for-10, 1-for-5).- Implementation date set and shareholders notified.4. **Impact on Shareholders**:- Share count reduced, but value per share increases proportionally.- Fractional shares may be cashed out, depending on company policy.
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