950% rally in 6 months! Last day to buy this multibagger microcap stock before reverse stock split. What this mean for investors?
ETMarkets.comAs the name suggests, it is exactly the opposite of what a stock split does. While a stock split divides shares into multiple shares, a reverse stock split consolidates multiple shares into fewer shares.
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What reverse stock split means
Let’s take an example of an investor who holds 10 shares of company X worth Rs 100 each. The total worth of her holding in the company is Rs 1,000. Company X has now announced a 2:1 reverse stock split.Since she holds the stock in her portfolio as of the record date, the number of shares in her account reduces from 10 to 5 after the record date. However, this doesn’t mean she is losing money, as the price of each of these shares adjust to the reverse stock split and increase from Rs 100 to Rs 200 apiece. Hence, the total value of her holding in the company remains the same at Rs 1,000, although her number of shares reduces to five and value of per share increases to Rs 200.
Reverse stock splits can be done in any ratio. A 5:1 reverse split will consolidate 5 shares into 1, while 10:1 will consolidate 10 shares into 1, and so on. As the price accordingly adjusts, the market capitalisation of the company remains unchanged.
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Why companies announce reverse stock splits
The primary reason why companies opt for reverse stock splits is when they consider the share price to be very low in the stock market. While low share prices may seem attractive, retail investors often associate penny stocks with speculative or financially distressed companies.Additionally, low share prices and face values often make the stocks miss key categories to be included in indices, which in turn could have resulted in some inflows. Also, additional surveillance on such stocks results in restricted price bands. Hence, companies often chose to consolidate their stocks.
Noble Polymers share price
Noble Polymers shares have been hitting upper circuits for several consecutive sessions now, hitting fresh 52-week high of Rs 20.58 apiece on BSE on Wednesday. The stock has rallied 48% in the past one month, and a whopping 950% in just six months.The shares of the company have skyrocketed 4,187.50% in 2026 so far. It has a market capitalisation of just Rs 18 crore.