What is a decrease in the total number of shares in a company called?

A decrease in the total number of shares in a company is called a reverse split, or more fully, a reverse stock split. It combines existing shares into fewer shares while proportionally increasing the price of each remaining share.

For example, in a 1-for-10 reverse split, every 10 old shares become 1 new share. An investor with 1,000 shares would hold 100 afterward, while the per-share price would theoretically rise tenfold. The company’s total market value and the investor’s overall value are not changed by the split itself, ignoring market movements and fees.

Companies often use reverse splits to raise a stock’s quoted price, particularly when they risk falling below a stock exchange’s minimum listing price. A reverse split can also reduce the number of shareholders if small holdings are exchanged for cash instead of fractional shares. It is the opposite of a regular stock split, which increases the number of shares and lowers the price per share.

A reverse split does not automatically improve a company’s finances. Investors sometimes view it negatively because it may follow a prolonged decline in the stock price, but the transaction itself is a restructuring of the share count rather than a direct gain in business value.