f you authorise an extra 1000 shares the voting power was 10% down to 5% over time as the shares get issued in deals or on the open market.
As you say there is no change until the outstanding sgares become authorized. So at the time of the RS nothing has changed in terms of your equity portion/voting rights. Even if they did CHOOSE to reduce the outstanding they can easily increase it whenever they need.
In the above example a 10 to 1 reverse split would land one with 10 shares on 1100 outstanding if the authorised are not split.
No your equity is based on outstanding not authorized. Yes when those share become outstanding your math is correct. At the time of the RS though the outstanding is 1000 not 1100.
Carboat, it is illegal, just not perceived like that because nobody ever reacted.
It is not ILLEGAL and something discovered by only few. Can you show any rule or law to say it is illegal. I find dozens of RS that did not reduce the authorized with just a cursory look. Zacks seems pretty clear on this (emphasis mine):
Reverse Splits A reverse stock split does the opposite of a forward split and reduces the number of outstanding shares by the exchange ratio. A reverse split would not force the company to exceed its authorized share limit, as the number of outstanding shares falls, but the company does have the option to reduce authorized shares in conjunction with a reverse split. A reduction in authorized and outstanding shares usually has a beneficial effect on share price in the long run, as investors perceive a much lower threat of future share dilution that would damage the value of the stock.
So they have the option not obligation. Or maybe people should write Zacks too.
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