A reverse stock split is when a company combines multiple existing shares into fewer shares at a higher price per share. For example, a company might consolidate every 10 shares into 1 share. The total number of shares outstanding decreases, but the overall value of each shareholder's investment remains unchanged. Companies often do this to raise their stock price above minimum exchange requirements.
You own 1,000 shares of a company trading at $0.50 per share, worth $500 total. The company announces a 10-for-1 reverse stock split. After the reverse split, you own 100 shares at $5 per share, still worth $500. The company did this because its stock price was too low to meet listing standards on major exchanges.
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