A stock split occurs when the board of directors of a company decides to increase the number of outstanding shares by issuing additional shares to current shareholders. In a reverse stock split, the company’s board of directors will decrease the number of outstanding shares by combining existing shares existing shareholders already own.
Neither a split nor a reverse split changes a company’s valuation, nor do they further dilute ownership. After a split or reverse split, all shareholders still own the same proportionate amount of the company as they did before; i.e., the value of the investment does not change.
For more information about stock splits and reverse stock splits check out our blog post on the topic.