When a company does a reverse split, it cancels its current outstanding stock and distributes new stock shares to its shareholders in proportion to how many shares they owned before the reverse split. For example, in a one-for-10 reverse split, shareholders receive a share of the company's new stock for every 10 shares of the company's old stock that they owned. If a shareholder previously owned 1,000 shares, she/he would own 100 shares after the reverse stock split.
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