Multiplication is easy if a stock is split larger. However, when a stock is reverse split it is divided. So my question is who makes out when the numbers are rounded? Say you have 100 shares and the reverse is a 7 to 1 split. That calculates to 14.285714 shares. So how is this rounded? Are fractions of a share possible? If reduced to 14 even, then who gets the value of the remainder? Thanks in advance.
Nowadays, fractions of a share due to reverse split may be possible. However there may be a cost to the company for "forcing" fractional shares onto a broker, so it might not be done. I'm not certain, and never had to deal with it lately. Back in the day, what would happen is this: It was up to the company, but usually they would give cash corresponding to the fractional share, e.g. 100/7 you would end up with 14 shares and cash equal to 0.285714 shares. This is not good for the company because they have to pay out cash, and they are a struggling company already as evidenced by the reverse split. Other times the company might say they will round you up, so 100/7 you would end up with 15 shares. This is not good for the company because they have to dilute shares in a sense (giving you 15-14.285714 = 0.714286 more shares than you had bought in the first place), but it was a way to entice naive traders. You might think you made money (0.714286 more shares) but the stock price dips some more after the reverse split. There is no free lunch.
