A stock split and a reverse stock split both change the number of shares a company has outstanding, but they do so in opposite ways and for very different reasons.

In a stock split, a company increases the number of shares while reducing the price per share proportionally. For example, in a 2-for-1 split, each existing share is split into two shares, and the price is halved. The company’s total market value remains unchanged. Stock splits are usually done when share prices have risen significantly, and management wants to make the stock more accessible to a wider range of investors. They can also improve liquidity by encouraging more trading activity.

A reverse stock split does the opposite. It reduces the number of shares and increases the price per share. In a 1-for-10 reverse split, ten shares are combined into one, and the price increases tenfold. Again, the market value remains the same. Companies often use reverse splits to meet exchange listing requirements, avoid delisting, or improve how the stock appears to investors when the price has fallen too low.

The key difference lies in intent and perception. Stock splits are typically associated with strength and growth, while reverse splits are often linked to financial stress or declining share prices. Neither action changes the underlying business, but both can influence investor sentiment and trading behaviour in the short term.