- Consolidation of shares is a corporate action where a company combines multiple numbers of shares into a smaller number of shares. Consolidation of shares is also known as reverse stock split. The company notifies the shareholders through email before the stock consolidation.
- For example,
- In the case of a share consolidation in the ratio of 1:5, the 5 shares will be reduced to 1 share. The 10,000 shares will be reduced to 2,000 shares. The number of shares reduces, but the overall value of the shares remains the same.
RELATED FACTS - There are circumstances where the shareholder could be left with a unit of stock that is less than one full share due to the reverse stock split or consolidation of shares. These shares are called fractional shares. Since fractional shares don’t trade in markets, the company appoints a trustee to buy them back.
- Fractional shares: Small parts of a full share—less than one whole stock. These usually happen when a company takes actions like stock splits, mergers, or share swaps, and the number of shares you get doesn’t come out to a full number. Since these small parts can't be sold in the stock market, the company or a trustee will usually buy them back and pay the value to your bank or trading account.
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