Corporate actions always create a buzz for stocks in the stock market. However, it can be good or bad depending upon how Mr. Market reacts to it. Share consolidation is also one of them, let’s discuss it in detail with examples and other related factors.
Table of Contents
What is Share Consolidation?
share consolidation meaning is a corporate action in which a firm reduces the number of stocks traded on the stock exchange. Share consolidation is the opposite of a stock split, where a share is divided (split) into several parts.
It is also called reverse stock split, stock merge, or share rollback. Consolidation of shares occurs when a firm reduces the number of shares held by current shareholders.
Things to Keep in might regarding Share consolidation
- When a business consolidates after a capital reduction, the company ‘s valuation suffers.
- Before a stock consolidation, a firm will tell you by email, just like any other corporate activity.
- Since it enhances the value of otherwise low-priced shares, it can suggest a company in crisis.
- The most typical motivations for companies to follow this approach are to stay relevant and avoid being delisted.
Example
Here is the examples to understand reverse stock split in a better way:
If you have 5,000 stocks of XYZ firm, a 10:1 share consolidation means that each of your ten shares will be reduced to one. As a result, your 5,000 shares will be decreased to 500.
When shares are consolidated, the number of shares issued decreases, but the price per share rises, preserving the value of your investment.
Real World Example
Let’s take an example of Arnold holdings. They did share consolidation in march 2020 & increased the face value from 2 to 10 per share. It means for every 5 stocks which investors were holding before reverse stock split will get 1 share.
If you were holding 2,000 stocks then you will get only 400 stocks after the reverse stock split. However, the value to your investment will not decrease by this as the value of your 400 stocks will be the same as the value of your 2,000 shares before the stock merge.
Understanding share Consolidation
companies can take many actions that impact on their capital structure. A reverse stock split is one of them, in which existing company stock shares are effectively merged to produce a smaller number of proportionally more valued shares.
Because reducing the number of shares has no effect on the value of the company, the price per share rises correspondingly.
Companies choose reverse stock splits for a variety of reasons, including per-share price boosting, and the associated ratios can range from 1-for-2 to 1-for-100.
Although reverse stock splits are frequently the result of a company’s stock losing a lot of value, they have no effect on the company’s worth.
Advantages of Share consolidation
Here are the major advantages of share consolidation:
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Avoid major exchange Actions
A stock’s price may have plummeted to new lows, leaving it exposed to increased market pressure and other unfavourable developments, including a failure to meet the exchange’s listing requirements.
For a stock to be listed on an exchange, the minimum bid price is usually specified. If the share drops below this bid price and stays below that level for an extended length of time, it may be delisted from the exchange.
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Attract well known investors
Since many institutional investors and mutual funds have prohibitions against buying stakes in a share whose price is below a minimal value, firms use reverse stock splits to keep higher stock prices.
Even if a firm is not under risk of being delisted by the exchange, its trading liquidity and reputation are damaged if it fails to qualify for buying by these large investors.
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Safety Measures
The number of shareholders, among other things, determines how a company is regulated in different jurisdictions throughout the world.
Companies can try to reduce the number of shareholders in order to fall under the jurisdiction of their preferred regulator or set of regulations by reducing the number of shares.
Companies that desire to become private may take steps like these to limit the number of shareholders.
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Boost stock price
Reverse splits may be used by firms aiming to create and float a spinoff, which is an independent company formed by selling or distributing new shares of an existing business or division of a parent corporation.
It may be difficult for a corporation planning a spinoff to price its spinoff firm stocks at a higher price if its stocks are selling at lower levels. This problem could be solved by reverse dividing the stock and boosting the value of each individual share.
Disadvantages of Share consolidation
In general, market participants do not think a reverse stock split is a good idea. It suggests that the stock price has reached its bottom and that the company’s board is seeking to artificially boost prices without a viable business plan. Furthermore, when the number of shares traded on the open market decreases, liquidity may suffer.
Is Share Consolidation good or bad?
Stock consolidation are sometimes seen unfavourably since they indicate that a company’s share price has fallen dramatically, potentially placing it at risk of delisting.
Certain retail investors who prefer companies with lower sticker prices may find the higher-priced shares after the split less appealing.
List of Share Consolidation in Past
| Firm name | Ex Date | Record Date | ND Start Date | ND End Date |
| L.G.BALAKRISHNAN & BROS.LTD. | 15-Mar-10 | 17-Mar-10 | 10-Mar-10 | 16-Mar-10 |
| LS INDUSTRIES LTD. | 26-May-10 | 09-Jun-10 | 26-May-10 | 14-Jun-10 |
| ALLIED COMPUTERS INTERNATIONAL (ASIA) LTD. | 29-Jun-10 | 01-Jul-10 | 24-Jun-10 | 29-Jun-10 |
| INNOVATIVE TECH PACK LTD. | 16-Sep-10 | 17-Sep-10 | 09-Sep-10 | 16-Sep-10 |
| ASAHI INFRASTRUCTURE & PROJECTS LTD. | 03-Nov-10 | 04-Nov-10 | 28-Oct-10 | 02-Nov-10 |
| STANDARD BATTERIES LTD. | 09-Nov-10 | 10-Nov-10 | 03-Nov-10 | 09-Nov-10 |
| GUJARAT METALLIC COAL & COKE LTD | 04-Mar-11 | 07-Mar-11 | 25-Feb-11 | 04-Mar-11 |
| GAYATRI SUGARS LTD. | 27-Apr-11 | 28-Apr-11 | 20-Apr-11 | 27-Apr-11 |
| BAFFIN ENGINEERING PROJECTS LTD. | 17-Jun-11 | 20-Jun-11 | 13-Jun-11 | 17-Jun-11 |
| INTER GLOBE FINANCE LTD. | 05-Jul-11 | 15-Jul-11 | 05-Jul-11 | 20-Jul-11 |
| WINSOME TEXTILE INDUSTRIES LTD.-$ | 15-Jul-11 | 18-Jul-11 | 11-Jul-11 | 15-Jul-11 |
| FIRSTOBJECT TECHNOLOGIES LTD. | 25-Jul-11 | 26-Jul-11 | 19-Jul-11 | 25-Jul-11 |
| WINSOME YARNS LTD. | 04-Aug-11 | 05-Aug-11 | 29-Jul-11 | 04-Aug-11 |
| VIJAY TEXTILES LTD. | 02-Sep-11 | 05-Sep-11 | 25-Aug-11 | 02-Sep-11 |
| SUPERTEX INDUSTRIES LTD. | 07-Sep-11 | 08-Sep-11 | 30-Aug-11 | 07-Sep-11 |
| SEA GOLD AQUA FARMS LTD. | 15-Sep-11 | – | 15-Sep-11 | 30-Sep-11 |
| Decipher Labs Ltd | 19-Sep-11 | 01-Oct-11 | 19-Sep-11 | 04-Oct-11 |
| JAUSS POLYMERS LTD. | 03-Oct-11 | 15-Oct-11 | 03-Oct-11 | 19-Oct-11 |
| Paisalo Digital Ltd | 04-Oct-11 | 05-Oct-11 | 27-Sep-11 | 04-Oct-11 |
| DYNACONS SYSTEMS & SOLUTIONS LTD. | 03-Nov-11 | 04-Nov-11 | 28-Oct-11 | 03-Nov-11 |
| Sezal Glass Limited | 09-Nov-11 | 11-Nov-11 | 02-Nov-11 | 09-Nov-11 |
| ANKA INDIA LTD. | 13-Jan-12 | 18-Jan-12 | 13-Jan-12 | 23-Jan-12 |
| RUBFILA INTERNATIONAL LTD. | 16-Jan-12 | 17-Jan-12 | 10-Jan-12 | 16-Jan-12 |
| Radix Industries (India) Limited | 03-Feb-12 | 17-Feb-12 | 03-Feb-12 | 22-Feb-12 |
| RADHE DEVELOPERS (INDIA) LTD. | 14-Feb-12 | 16-Feb-12 | 09-Feb-12 | 15-Feb-12 |
| ADITYA SPINNERS LTD. | 02-Mar-12 | 05-Mar-12 | 28-Feb-12 | 03-Mar-12 |
| Nandan Denim Limited | 07-Mar-12 | 09-Mar-12 | 01-Mar-12 | 07-Mar-12 |
| MAHAN INDUSTRIES LTD. | 09-Mar-12 | 12-Mar-12 | 02-Mar-12 | 09-Mar-12 |
| GANGA PAPERS INDIA LTD. | 12-Mar-12 | 19-Mar-12 | 12-Mar-12 | 21-Mar-12 |
| PASUPATI SPG.& WVG.MILLS LTD. | 15-Mar-12 | 16-Mar-12 | 09-Mar-12 | 15-Mar-12 |
| ANJANI SYNTHETICS LTD.-$ | 28-Mar-12 | 29-Mar-12 | 21-Mar-12 | 28-Mar-12 |
| FOUNDRY FUEL PRODUCTS LTD. | 14-Jun-12 | 15-Jun-12 | 11-Jun-12 | 14-Jun-12 |
| RESURGERE MINES & MINERALS INDIA LTD. | 14-Jun-12 | 15-Jun-12 | 08-Jun-12 | 14-Jun-12 |
| ZYDEN GENTEC LTD. | 26-Sep-12 | 27-Sep-12 | 20-Sep-12 | 26-Sep-12 |
| NOVA IRON & STEEL LTD. | 30-Oct-12 | 31-Oct-12 | 22-Oct-12 | 30-Oct-12 |
| Rockon Enterprises Ltd | 02-Nov-12 | 05-Nov-12 | 29-Oct-12 | 02-Nov-12 |
| NOUVEAU GLOBAL VENTURES LTD. | 10-Dec-12 | 11-Dec-12 | 04-Dec-12 | 10-Dec-12 |
| GLOBAL CAPITAL MARKETS LTD. | 10-Jan-13 | 11-Jan-13 | 04-Jan-13 | 10-Jan-13 |
| CRESSANDA SOLUTIONS LTD. | 18-Feb-13 | 20-Feb-13 | 13-Feb-13 | 19-Feb-13 |
| FOURTH GENERATION INFORMATION SYSTEMS LTD. | 22-Feb-13 | 25-Feb-13 | 15-Feb-13 | 22-Feb-13 |
| DION GLOBAL SOLUTIONS LTD. | 28-Feb-13 | 01-Mar-13 | 22-Feb-13 | 28-Feb-13 |
| INDOVATION TECHNOLOGIES LTD. | 14-Mar-13 | 15-Mar-13 | 08-Mar-13 | 14-Mar-13 |
| Mindvision Capital Ltd | 26-Mar-13 | 28-Mar-13 | 20-Mar-13 | 25-Mar-13 |
| SYBLY INDUSTRIES LTD.-$ | 04-Apr-13 | 05-Apr-13 | 03-Apr-13 | 04-Apr-13 |
| Adroit Infotech Ltd | 10-Apr-13 | 12-Apr-13 | 05-Apr-13 | 11-Apr-13 |
| RAMINFO LIMITED | 10-Apr-13 | 12-Apr-13 | 05-Apr-13 | 11-Apr-13 |
| INDIA INFRASPACE LTD. | 14-May-13 | 26-May-13 | 14-May-13 | 29-May-13 |
| DUNCANS INDUSTRIES LTD. | 23-May-13 | 24-May-13 | 20-May-13 | 23-May-13 |
| GOPALA POLYPLAST LTD. | 23-May-13 | 24-May-13 | 20-May-13 | 23-May-13 |
| Excel Castronics Limited | 07-Jun-13 | 21-Jun-13 | 07-Jun-13 | 26-Jun-13 |
| Joy Realty Limited | 12-Jun-13 | 24-Jun-13 | 12-Jun-13 | 26-Jun-13 |
| S&T CORPORATION LTD. | 13-Jun-13 | 27-Jun-13 | 13-Jun-13 | 02-Jul-13 |
| KUNSTSTOFFE INDUSTRIES LTD. | 11-Jul-13 | 12-Jul-13 | 05-Jul-13 | 11-Jul-13 |
| VENTURA TEXTILES LTD. | 29-Jul-13 | 30-Jul-13 | 24-Jul-13 | 29-Jul-13 |
| Matra Kaushal Enterprise Limited | 02-Aug-13 | 16-Aug-13 | 02-Aug-13 | 21-Aug-13 |
| Neueon Towers Ltd | 07-Aug-13 | 10-Aug-13 | 02-Aug-13 | 07-Aug-13 |
| NORRIS MEDICINES LTD. | 22-Aug-13 | 23-Aug-13 | 21-Aug-13 | 22-Aug-13 |
| NEYCER INDIA LTD. | 26-Aug-13 | 27-Aug-13 | 22-Aug-13 | 26-Aug-13 |
| OMEGA INTERACTIVE TECHNOLOGIES LTD. | 25-Sep-13 | – | 20-Sep-13 | 26-Sep-13 |
| Proaim Enterprises Ltd | 31-Oct-13 | 01-Nov-13 | 25-Oct-13 | 31-Oct-13 |
| RAVILEELA GRANITES LTD. | 28-Nov-13 | 06-Dec-13 | 28-Nov-13 | 11-Dec-13 |
| CIL NOVA PETROCHEMICALS LTD. | 05-Dec-13 | 06-Dec-13 | 29-Nov-13 | 05-Dec-13 |
| NIHAR INFO GLOBAL LTD. | 22-Apr-14 | 23-Apr-14 | 15-Apr-14 | 22-Apr-14 |
| KRIPTOL INDUSTRIES LTD. | 23-Apr-14 | 25-Apr-14 | 17-Apr-14 | 23-Apr-14 |
| KKRRAFTON Developers Ltd | 17-Oct-14 | 20-Oct-14 | 13-Oct-14 | 17-Oct-14 |
| SYSCHEM (INDIA) LTD. | 12-Dec-14 | 15-Dec-14 | 08-Dec-14 | 12-Dec-14 |
| Negotium International Trade Ltd | 29-Oct-15 | 31-Oct-15 | 26-Oct-15 | 29-Oct-15 |
| Quasar India Ltd | 29-Oct-15 | 31-Oct-15 | 26-Oct-15 | 29-Oct-15 |
| Inceptum Enterprises Ltd | 03-Nov-15 | 04-Nov-15 | 28-Oct-15 | 03-Nov-15 |
| Infronics Systems Ltd | 05-Nov-15 | 07-Nov-15 | 02-Nov-15 | 05-Nov-15 |
| MAHALAXMI RUBTECH LTD. | 05-Nov-15 | 06-Nov-15 | 30-Oct-15 | 05-Nov-15 |
| RANDER CORPORATION LTD. | 26-Nov-15 | 27-Nov-15 | 19-Nov-15 | 26-Nov-15 |
| CCL INTERNATIONAL LTD. | 04-Dec-15 | 07-Dec-15 | 30-Nov-15 | 04-Dec-15 |
| Mukta Agriculture Ltd | 14-Jan-16 | 15-Jan-16 | 08-Jan-16 | 14-Jan-16 |
| NETLINK SOLUTIONS (INDIA) LTD. | 28-Jan-16 | 29-Jan-16 | 21-Jan-16 | 28-Jan-16 |
| Mystic Electronics Ltd | 08-Feb-16 | 09-Feb-16 | 02-Feb-16 | 08-Feb-16 |
| VEER ENERGY & INFRASTRUCTURE LTD. | 22-Mar-16 | 23-Mar-16 | 16-Mar-16 | 22-Mar-16 |
| Palred Technologies Limited | 26-Apr-16 | 27-Apr-16 | 20-Apr-16 | 26-Apr-16 |
| PS IT Infrastructure & Services Limited | 11-May-16 | 12-May-16 | 05-May-16 | 11-May-16 |
| Safal Securities Ltd | 13-Oct-16 | 14-Oct-16 | 05-Oct-16 | 13-Oct-16 |
| Veerhealth Care Limited | 29-Nov-16 | 30-Nov-16 | 23-Nov-16 | 29-Nov-16 |
| Chandni Textiles Engineering Ind. Ltd | 08-Dec-16 | 09-Dec-16 | 02-Dec-16 | 07-Dec-16 |
| TTI Enterprise Ltd | 21-Dec-16 | 22-Dec-16 | 15-Dec-16 | 21-Dec-16 |
| SANGUINE MEDIA LTD. | 19-Jan-17 | 20-Jan-17 | 13-Jan-17 | 19-Jan-17 |
| ALLIED COMPUTERS INTERNATIONAL (ASIA) LTD. | 17-Feb-17 | 20-Feb-17 | 13-Feb-17 | 16-Feb-17 |
| AADHAAR VENTURES INDIA LTD. | 02-Mar-17 | 03-Mar-17 | 23-Feb-17 | 02-Mar-17 |
| SVC Resources Limited | 23-Mar-17 | 24-Mar-17 | 20-Mar-17 | 23-Mar-17 |
| Veronica Production Ltd | 23-Mar-17 | 24-Mar-17 | 17-Mar-17 | 23-Mar-17 |
| Ontic Finserve Ltd | 13-Apr-17 | 17-Apr-17 | 07-Apr-17 | 13-Apr-17 |
| AVANCE TECHNOLOGIES LTD. | 24-Apr-17 | 25-Apr-17 | 18-Apr-17 | 24-Apr-17 |
| Mishtann Foods Ltd | 05-May-17 | 08-May-17 | 28-Apr-17 | 05-May-17 |
| Xtglobal Infotech Ltd | 12-May-17 | 15-May-17 | 05-May-17 | 12-May-17 |
| Global Infratech & Finance limited | 23-Aug-17 | 25-Aug-17 | 18-Aug-17 | 23-Aug-17 |
| BANAS FINANCE LTD. | 29-Aug-17 | 30-Aug-17 | 22-Aug-17 | 29-Aug-17 |
| EVERLON SYNTHETICS LTD. | 29-Sep-17 | 03-Oct-17 | 25-Sep-17 | 29-Sep-17 |
| IND Renewable Energy Ltd | 29-Sep-17 | 03-Oct-17 | 25-Sep-17 | 29-Sep-17 |
| Danube Industries Ltd | 16-Oct-17 | 17-Oct-17 | 10-Oct-17 | 16-Oct-17 |
| BLUE CIRCLE SERVICES LTD. | 23-Oct-17 | 24-Oct-17 | 13-Oct-17 | 23-Oct-17 |
| BAMPSL SECURITIES LTD. | 26-Oct-17 | 27-Oct-17 | 18-Oct-17 | 26-Oct-17 |
| ESAAR (INDIA) LTD. | 10-Nov-17 | 13-Nov-17 | 06-Nov-17 | 10-Nov-17 |
| JMD Ventures Ltd | 04-Dec-17 | 05-Dec-17 | 27-Nov-17 | 04-Dec-17 |
| Confidence Finance And Trading Limited | 27-Dec-17 | 28-Dec-17 | 20-Dec-17 | 27-Dec-17 |
| ATHARV ENTERPRISES LTD. | 12-Apr-18 | 13-Apr-18 | 06-Apr-18 | 12-Apr-18 |
| SWADESHI INDUSTRIES LEASING CO.LTD. | 14-Jun-18 | 15-Jun-18 | 08-Jun-18 | 14-Jun-18 |
| Signet Industries Limited | 13-Aug-18 | 14-Aug-18 | 07-Aug-18 | 13-Aug-18 |
| UNIMODE OVERSEAS LTD. | 11-Oct-18 | 12-Oct-18 | 05-Oct-18 | 11-Oct-18 |
| Colorchips New Media Ltd | 22-Oct-18 | 23-Oct-18 | 15-Oct-18 | 22-Oct-18 |
| BRIJLAXMI LEASING & FINANCE LTD. | 15-Nov-18 | 17-Nov-18 | 12-Nov-18 | 15-Nov-18 |
| MANGAL CREDIT AND FINCORP LTD. | 26-Nov-18 | 27-Nov-18 | 16-Nov-18 | 26-Nov-18 |
| COMFORT INTECH LTD | 24-Jan-19 | 25-Jan-19 | 18-Jan-19 | 24-Jan-19 |
| Jamshri Realty Ltd | 21-Feb-19 | 22-Feb-19 | 18-Feb-19 | 21-Feb-19 |
| Sai Baba Investment And Commercial Enterprises Ltd | 28-Mar-19 | 01-Apr-19 | 25-Mar-19 | 28-Mar-19 |
| DHANLEELA INVESTMENTS & TRADING COMPANY LTD. | 12-Apr-19 | 15-Apr-19 | 10-Apr-19 | 12-Apr-19 |
| Thinkink Picturez Ltd | 06-Feb-20 | 07-Feb-20 | 01-Feb-20 | 06-Feb-20 |
| Arnold Holdings Ltd | 18-Mar-20 | 19-Mar-20 | 11-Mar-20 | 18-Mar-20 |
Note
Data is based on NSE website.
Conclusion
Stock consolidation is mostly bad for the company but not all the time. You need to find an opportunity to know the company and have a convection based on research.
This is all from our side regarding Share Consolidation. Let us know your views about consolidation of shares in the comment section.
Other interesting blogs related to share consolidation
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Frequently Asked Questions About Consolidation of Shares
Why do shares consolidate?
When a firm reduces the number of shares it issues, it is called a share consolidation. As a result, the share price rises accordingly, and the value of each shareholder's holding remains unaltered in relation to the company's market capitalization.
Is consolidation good or bad?
Combining numerous loans into a single loan decreases the number of payments and interest rates you must deal with. Consolidation can also help you enhance your credit by lowering your risks of skipping a payment or paying late.
What happens after share consolidation?
A present shareholder possesses fewer shares after a share consolidation, yet each share is valued more proportionately. As a consequence, share consolidations have no effect on the total value of what shareholders possess or the company's overall market capitalization.
Do you lose money on a reverse split?
When a corporation performs a reverse stock split, each of its outstanding shares is reduced to a fraction of a share. Investors may lose money as a consequence of trading price changes caused by reverse stock splits.
What does consolidate shares mean?
A consolidation is when a firm adjusts the structure of its share capital by decreasing the quantity of shares in issue while increasing the par value of each stock.
