Global Reverse Stock Splits Hit Record Amid Struggles in Small-Cap Sector

Global reverse stock splits have reached unprecedented levels this year, spotlighting the difficulties small-cap companies encounter in maintaining stock exchange listings amid a booming technology sector propelled by artificial intelligence advancements. Research from Wall Street Horizon reported 288 reverse splits through October, starkly outnumbering the 53 traditional stock splits during the same period.

A Reuters analysis revealed that nearly 80% of firms executing reverse splits possess market capitalizations below $250 million. These reverse splits consolidate shares to elevate stock prices, often meeting exchange listing thresholds, and are commonly interpreted as indicators of financial distress. This contrasts with traditional splits, which lower individual share prices and typically attract increased interest from retail investors.

The widening disparity between reverse and traditional splits underlines a divided equity market landscape. Small-cap firms resort to financial restructuring to sustain their stock value, whereas large-cap companies, buoyed by AI innovations and increased technology investments, continue to achieve remarkable gains.

Brett Mitstifer, Chief Investment Officer at Flagstar Bank, explained, "Slower earnings growth and higher funding costs have exacerbated the problems at smaller companies." Small caps now constitute only 1.2% of total U.S. market capitalization, nearing a century low and significantly below the 3.6% historical average, according to Pzena Investment Management.

In contrast, AI-related and major technology stocks have accounted for approximately 75% of the S&P 500's returns from November 2022—coinciding with the launch of OpenAI's ChatGPT—through September 2025, as noted by J.P. Morgan Asset Management.

Leading corporations such as Apple, Amazon, Nvidia, Netflix, ServiceNow, and Walmart have executed traditional stock splits in recent years to enhance their market appeal as they expanded within the megacap sector. Christine Short, Head of Research at Wall Street Horizon, remarked, "There’s a lot of competition among asset classes and companies. So stock splits can increase a company’s profile and bring it back into the fold."

Retail investor interest in major technology stocks has accelerated in 2025, with investments in Netflix rising by 34% compared to the entirety of 2024. Alphabet has experienced a 19% increase in inflows, while Meta, Tesla, and Nvidia have seen respective upticks of 19%, 13%, and 10%, according to VandaTrack data.