Reverse Stock Split: Impact on Australian Investors in 2025

Reverse stock splits are making headlines on the ASX in 2025, as more companies turn to this strategic tool to reshape their share structure and attract new investment. While the concept might sound like financial jargon, its impact on your portfolio could be significant—especially with fresh regulatory changes coming into effect this year.

What is a Reverse Stock Split?

At its core, a reverse stock split reduces the number of a company’s outstanding shares while increasing the share price proportionally. For example, in a 1-for-10 reverse split, every 10 existing shares are consolidated into one new share. If you held 1,000 shares at $0.20 each, you’d end up with 100 shares at $2.00 each. The total value of your investment remains the same—at least on paper.

• Purpose: Companies usually pursue reverse splits to boost their share price above key thresholds, avoid delisting, or appeal to institutional investors.
• Investor impact: The percentage ownership stays unchanged, but the optics and liquidity can shift dramatically.

In Australia, reverse stock splits (often called consolidations) are governed by ASX Listing Rules and must be approved by shareholders. In 2025, updates to these rules have streamlined the process, making it easier for companies to execute consolidations swiftly and with fewer administrative hurdles.

Why Are More ASX Companies Using Reverse Splits in 2025?

This year has seen a surge in reverse stock splits across sectors like tech, mining, and biotech. Several factors are driving the trend:

• Regulatory pressure: The ASX has tightened compliance standards, raising minimum share price thresholds for continued listing from $0.10 to $0.20 as of March 2025. Companies below this mark risk being removed from the exchange.
• Market perception: Penny stocks often struggle to attract institutional capital. A higher share price can improve the company’s image and broaden its potential investor base.
• Index eligibility: Major indices and some managed funds have minimum share price or market cap requirements. A reverse split can help companies maintain or regain inclusion.

Real-world example: In February 2025, Australian biotech firm Cellinex announced a 1-for-20 reverse split after its share price slipped below $0.15. The move allowed Cellinex to stay on the ASX and negotiate a fresh capital raising with overseas investors, illustrating the strategic flexibility a split can provide.

What Should Investors Watch Out For?

While a reverse stock split doesn’t change the underlying value of your investment, it can be a red flag—or a turning point. Here’s what to consider before reacting:

• Signal of distress? Frequent or large reverse splits can be a sign a company is struggling to maintain its share price or meet exchange requirements. Dig into the company’s financials and recent announcements.
• Liquidity and volatility: Fewer shares outstanding can mean wider bid-ask spreads and more volatile price swings. This can make trading less predictable, especially for smaller ASX-listed companies.
• Brokerage impacts: Some Australian brokers may have minimum shareholding requirements or charge fees for handling fractional shares. Check with your broker if you’re affected by a consolidation.
• Tax implications: Reverse splits are generally not taxable events in Australia, but it’s wise to keep records for future capital gains calculations.

For those holding exchange-traded funds (ETFs) or managed funds, reverse splits of underlying holdings are typically handled behind the scenes and reflected in unit prices, with little to no disruption for investors.

The Bottom Line: Stay Alert, Not Alarmed

Reverse stock splits can be a pragmatic move for ASX-listed companies under regulatory or market pressure, especially in 2025’s tighter compliance landscape. For investors, the key is to look past the optics—understand why the split is happening, assess the company’s long-term prospects, and monitor any changes in liquidity or trading conditions.

As always, staying informed and proactive is the best defence. Keep an eye on company announcements, review your portfolio, and don’t let a consolidation catch you by surprise.