The referred to as a(n) b. reverse stock split. Therefore , b. reverse stock split is correct .
When a company decreases its outstanding shares of stock by exchanging 1 share of stock for 10 shares, this is referred to as a b. reverse stock split.
A reverse stock split is a corporate action that reduces the number of shares outstanding while increasing the share price proportionally.
In this case, the exchange of 1 share for 10 shares consolidates the existing shares, resulting in a higher per-share value.
Reverse stock splits are typically undertaken by companies to boost the perceived value of their shares, especially when the stock price has fallen to very low levels.
By reducing the number of shares in circulation and increasing the share price, the company aims to attract investors and comply with listing requirements of stock exchanges, which often have minimum share price thresholds.
This process is the opposite of a traditional stock split, where a company increases its outstanding shares to make individual shares more affordable.
In a reverse stock split, the goal is to enhance the stock's image and maintain compliance with exchange regulations.
It is important to note that while a reverse stock split affects the number of shares outstanding, it does not alter the overall market capitalization of the company.