Reverse Stock Split is the opposite of stock split.

Reverse stock split is one of

the activities of issuer companies to raise their share price and reduce the number of
shares outstanding. In some cases, a reverse stock split is an attempt to remain listed
on a large stock exchange because the stock price may fall too low to be excluded
from the listing.
Three main reasons companies issuing reverse stock split are as follows:
1. Reverse stock split will reduce transaction costs; the reduced number of shares will
cause transaction costs are also reduced.
2. Reverse stock split will improve the flexibility of new share price when needed.
Companies issuing reverse stock split will reduce the nominal value of their shares, so
when the company will issue new shares the company does not need to set its nominal
value at a discount for its new share.
3. Reverse stock split will increase institutional and international investors. The
Company believes that by merging the stocks will raise the profile of the company in
the eyes of institutional investors.
Companies that do reverse stock split, generally, are companies that are in big
trouble, both in business and / or finance. The purpose of the company in Indonesia is
to conduct a stock merger (reverse stock split) is to form stock prices higher than
before (instead of raising stock prices), aligning stock prices with shares of similar
sectors or that are considered to have similar characteristics, raising stock position
from Shares that enter the development board category to the main board and form a
more reasonable stock price.
An example of a reverse stock split case in a company in Indonesia is the
MITI case. MITI is PT. Mitra Investindo Tbk. MITI conducted reverse stock split on
June 3, 2014. An Investor has 20,000 shares of MITI or 200 lots for 175, he is
confused when it is sold for only 50 lots, when he feels he has never sold the stock
since he bought it. This means that the investor's shares are diluted as much as 150
lots since the reverse stock split is 4: 1, the stock price should have risen 4x fold to
800 because MITI stock price closing on 2/6/2014 is 200. But in reality the value of
the stock decreases at Initial Share Trading with New Nominal Value on June 3, 2014
and continues to weaken to 159 prices on June 25, 2014. Then climb back to 235 on
July 7, 2014. Then on August 11, 2014 the investor sold it at the price 221 of 50 lots
or 5,000 sheets. Although Investors profit from price increases from 175 to 221
(26.28%) but because the number of shares decreases from 20,000 pieces or 200 lots
to 5,000 sheets or 50 lots (diluted 75%) So the Investor has a net loss of 26.28%.