How to Profit From a Reverse Stock Split

April 29, 2026

As an investor, you need to understand a lot of terminology. One of those terms is a stock split. This typically occurs when a stock has performed exceptionally well, as was the case with NVDA 🔎, AMC 🔎 or BKNG 🔎. The number of shares outstanding is increased, and the stock price is reduced to a more attractive level.

But this isn’t the only type of stock split available. There is also a reverse stock split. This most commonly happens when a share price is struggling, and the company wants to make it look more attractive.

Keep reading as we explore reverse stock splits, why a company might want to complete one, a few recent examples, and, most importantly, how to profit from one.

What is a Reverse Stock Split?

Reverse stock splits typically happen when a companies stock price drops to unattractive levels.

When a company decides to perform a reverse stock split, it reduces the number of shares outstanding and increases the price per share. While everything is done in proportion, the company’s value remains the same, but the perception of its stock can be influenced.

The math behind a reverse stock split is simple. For example, let’s assume a company will go through a 1-to-10 reverse stock split, and the stock price is currently trading at $1.25. For every ten shares of stock you own, you will have one share after the split. However, instead of the price per share being $1.25, it will become $12.50.

Why Do Companies Do a Reverse Stock Split?

There are a couple of reasons why companies perform a reverse stock split. Most exchanges require companies to meet a minimum share price to remain listed. For example, the NASDAQ requires a minimum share price of $1.00. The company could be delisted if the price falls below this for 30 consecutive days. By using a reverse stock split, a company can increase its stock price over $1.00 to remain listed.

Most companies utilize a reverse stock split because their share price has fallen significantly. As a retail investor, you might stumble upon a company with a stock price of $0.75. While the company might be in an attractive sector with a lot of growth potential, a stock price this low can turn many people off. It makes it look like there are serious financial issues at the company (which there might be). By strategically increasing the share price, they’re able to attract institutional and retail investors.

Is a Reverse Stock Split Good?

If you’re an investor in a company announcing a reverse stock split, you may wonder if this is good or bad. The answer to this question isn’t exactly clear-cut. The reverse stock split itself isn’t a good or a bad thing. All it’s doing is adjusting the shares outstanding and the share price.

The outcome will help you decide whether a reverse stock split is in the company’s best interest. Most of the time, reverse stock splits happen because there is an underlying issue with the business itself. This is a way to give the company additional time to turn things around before it finds itself filing for bankruptcy.

While this might not sound overly encouraging, not all reverse stock splits are bad. Several have actually allowed businesses to survive, and today, they’re thriving companies.

Quick check: Companies that survive reverse splits almost always have improving fundamentals underneath. Companies that don't are usually bleeding cash. Ziggma's Stock Score surfaces both signals in seconds.

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Reverse Stock Split Examples

We've talked about how reverse stock splits are commonly a last-ditch effort to turn a business around. The truth is that most companies that perform a reverse stock split end up going bankrupt, getting bought out, or continuing to decline. But not all of them — and the difference between the two outcomes is what investors really need to study.

Here are three notable reverse stock splits that show both sides of the coin.

General Electric (GE) — The Turnaround

Since the end of former CEO Jack Welch's leadership, General Electric had been a struggling company for the better part of two decades. Although it sold off several business units to boost profitability, its stock price hovered within a narrow trading range for years.

Then, in 2021, GE executed a 1-for-8 reverse stock split. This took its pre-split adjusted price of around $12.69 and moved it back over $100 for the first time in years. Because the company had slimmed down significantly, management felt the adjusted outstanding shares would better represent the leaner business underneath.

GE has continued to trade well above its pre-split levels since — and the subsequent break-up into GE Aerospace, GE Vernova, and GE HealthCare unlocked further value. The reverse split here marked a genuine inflection point, not a postponement of bad news.

Booking Holdings (BKNG) — The Dot-Com Survivor

The Dot-com bubble was a defining period for the financial markets. From 1995 to 2000, the technology-heavy NASDAQ went from 1,000 listed companies to more than 5,000 due to a significant rise in investment in internet-based companies.

When the bubble burst in March 2000, Booking Holdings (then Priceline) was one of many companies left fighting to survive. In an attempt to clean up its share structure, it executed a 1-for-6 reverse stock split in 2003. While many of its peers didn't make it, Booking is now one of the best-performing stocks of the past two decades, up tens of thousands of percent from its post-crash lows.

Like GE, this is the rare case where the reverse split was the floor — not the ceiling.

AMC Entertainment (AMC) — The Cautionary Tale

AMC became one of the most-watched meme stocks of 2021, riding a wave of retail enthusiasm to prices above $60. But the underlying business — heavily indebted, with theater attendance still recovering from the pandemic — never caught up to the share price.

By August 2023, AMC executed a 1-for-10 reverse stock split, lifting the price from roughly $2 to around $14 overnight. Management framed it as a step toward simplifying the capital structure and raising new capital. The market saw it differently: shares fell 25% on day one of the split-adjusted trading.

Nearly three years later, AMC trades around $1.50 — meaning the post-split stock has lost roughly 90% of its value. AMC illustrates the more common reverse-split outcome: the split itself solves nothing if the underlying business hasn't changed.

The Pattern

GE and Booking shared something AMC didn't: improving fundamentals underneath the share price action. Lower debt, better margins, clearer strategy. That's the real signal to look for — not the split ratio, not the price target, not the management commentary. The split is just the headline. The financials underneath are the story.

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How to Profit From a Reverse Stock Split

Now that you understand the basics of a reverse stock split, you probably want to know if making a profit is possible. Unfortunately, profiting from a reverse stock split isn’t easy and far from guaranteed, but there are a few options.

Buy The Stock Before the Split

If your research leads you to believe that a company’s reverse stock split is part of its restructuring plans, like the case was with General Electric, you could purchase shares before the split. The hope would be that this would boost buyers’ confidence, sending the stock price higher.

Before buying into any reverse-split candidate, run the ticker through Ziggma's Stock Score to check its financial health, debt load, and profitability trend in one view. Most reverse-split companies score poorly — the few that don't are the turnaround candidates worth watching.

Before buying into any reverse-split candidate, run the ticker through Ziggma's Stock Score to check financial health, debt load, and profitability in one view. Most reverse-split companies score poorly — the few that don't are the turnaround candidates worth watching.

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Short the Stock

If you feel this is the beginning of the end for the company, you could choose to short the stock. When you short a stock, you borrow shares and sell them with the hopes you can buy them back later at a lower price. You’ll make money if the stock price declines after you short the stock. However, short selling is risky, and you should understand the risks involved beforehand.

Options Trading

You could use options to profit from expected volatility in the stock price. If you own shares of the stock, you could purchase put options, which will protect your investment from downside movement. If you want to skip purchasing shares of the stock, you could attempt to profit from a decline by selling put options. However, similar to short selling, it’s important to understand the risks of options trading.

The Bottom Line

Even though there have been some success stories, reverse stock splits are typically bad news for a company’s stock price. While there are some ways to profit, they include a lot of risk, so it’s important to research and ensure you’re willing to lose the money you invest.

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