Reverse Stock Split Explained: Why Companies Consolidate Shares (And What It Means for Your Portfolio)

Banzai International just announced a 1-for-10 reverse stock split taking effect July 8, 2025. If you’re confused about what that actually does—you’re not alone. Let’s break it down.

The Mechanic Is Simple, but Looks Weird

Imagine you own 1,000 shares at $0.50 each. After a 1-for-10 reverse split, you’d have 100 shares trading at roughly $5.00. Your total value: unchanged. It’s like swapping ten $1 bills for one $10 bill—nothing actually changes except the denominations.

Why Do This At All?

Companies reverse split mainly for one reason: the stock price is embarrassingly low. Specifically:

• Nasdaq/NYSE compliance – Listings require minimum share prices; going too low means delisting
• Institutional investors have thresholds – Some funds won’t touch penny stocks
• Psychology – A $5 stock feels more legit than a $0.50 stock, even if the fundamentals didn’t change
• Wild volatility – Penny stocks swing like crazy; reverse splits can calm that down

What’s Happening With Banzai

Banzai’s stock was trading under $1, which puts it at delisting risk. This move is purely defensive—boost the per-share price, stay compliant, reset investor perception. Shareholders approved it June 27; trading resumes on the new basis July 8.

Other Recent Cases Show a Pattern

Comstock Inc. (NYSE:LODE) did a 1-for-10 reverse split on February 24, 2025. Outstanding shares dropped from 237.7M to 23.8M. Same goal: avoid delisting and restructure the capital base.

Arrowhead Pharmaceuticals (NASDAQ:ARWR) and China Pharma Holdings (NYSE:CPHI) did similar moves earlier this year—both citing compliance and institutional appeal.

What Actually Happens to You

• Your ownership % stays the same
• Your portfolio value stays the same (in theory)
• Your broker handles fractional shares automatically or pays you cash
• The stock might be volatile for a few days around the split date

Red Flag or Routine?

Reverse splits can signal trouble—companies in freefall sometimes do them. But they’re also just maintenance for companies addressing compliance. Don’t panic automatically, but do check: Is earnings improving? Is there a real turnaround story? Or is this just cosmetic window dressing?

Bottom line: A reverse split doesn’t change what the company is worth. It just changes how many pieces you own.