What is a 5 for 1 reverse stock split?

I found a cheap stock thats doign a 5 for 1 reverse stock split. What does that mean? What does it mean for the price of the stock?What is a 5 for 1 reverse stock split?
In English:





They swap 5 shares for one. The usual point of it is to set a share price that is attractive to investors in a specfic market.





For example, a mining company trading at $2.50 a share does a 5 for 1 reverse split. Now your 5 shares at $2.50 are 1 share trading at $10.00.





This may create a perception of prosperity and strength and take it out of the ';penny stock'; league and allow it to compete for investor dollars with larger more successful companies.What is a 5 for 1 reverse stock split?
every 5 shares become 1 and hopefully it it worth 5x as much
A reverse stock split reduces the number of shares and increases the share price proportionately. For example, if you own 10,000 shares of a company and it declares a one for ten reverse split, you will own a total of 1,000 shares after the split. A reverse stock split has no affect on the value of what shareholders own. Companies often split their stock when they believe the price of their stock is too low to attract investors to buy their stock. Some reverse stock splits cause small shareholders to be ';cashed out'; so that they no longer own the company鈥檚 shares.





A company鈥檚 board of directors may declare a reverse stock split without shareholder approval. Although the SEC has authority over a broad range of corporate activity, state corporate law and a company鈥檚 articles of incorporation and by-laws govern reverse stock splits.





If a company is required to file reports with the SEC, it may notify its shareholders of a reverse stock split on Forms 8-K, 10-Q and 10-K.
The total shares outstanding will be divided by 5 thus each share becoming 5 times higher. This is usually not a good signal from a company.





Say you own 50 shares at 10 dollars a piece





Now you will own 10 shares at 50 dollars a piece





Your percentage of the company is the same , there are just less shares outstanding than before.
If you mean a 5 for 1 stock split (not a reverse split) this is the answer: 5 for 1 would mean that you would get 5 shares of stock for the price of what that stock used to be worth before the split. Corporations usually do this in order to increase the amount of shares they have on the market as well as to reduce the cost of each share so that the stock would appeal to smaller capital investors.





So the price of that stock would then be divided up into 5ths and each stock you own would be 1/5 of what that stock was worth before the split.





Example: $10 - - 5 for 1 split (not reverse) = 5 shares and $2 each





But if you meant a reverse stock split than it would be 1 for 5. So for every 5 shares of stock that you own you would get 1 share of stock (as a replacement of the 5 shares) but the value of that stock would be worth the total amount of those 5 shares added together. This would reduce the amount of shares you own, but the amount of capital that you would have invested in that corporation would remain the same. A 5 for 1 reverse stock split would mean that for every 1 share you would get 5 shares, which would just be a normal stock split explained in the beginning of this answer.