Nov 18 (Reuters) - Reverse stock splits globally have climbed to a record this year, underscoring the strain on small-cap companies struggling to stay listed even as an AI-fueled rally lifts technology heavyweights to fresh highs.
Companies carried out a record 288 reverse splits through the end of October, compared with just 53 traditional splits, according to research firm Wall Street Horizon.
Nearly 80% of the companies that executed reverse splits had a market value below $250 million, a Reuters analysis of the data showed.
Reverse stock splits consolidate multiple shares into one and are typically used to lift a company’s share price above exchange-listing requirements.
They are often viewed as a sign of financial stress, unlike traditional stock splits, which reduce the price per share and tend to draw increased interest from retail investors.
The record gap between reverse and traditional splits this year highlights a widening divide in equity markets, with struggling small caps using financial maneuvers to support their share prices while megacaps extend a powerful rally driven by AI and technology spending.
"Slower earnings growth and higher funding costs have exacerbated the problems at smaller companies," said Brett Mitstifer, chief investment officer of private banking and wealth management at Flagstar Bank.
Small caps represent just 1.2% of total U.S. market capitalization, close to a 100-year low and well below the historical average of 3.6%, according to data from Pzena Investment Management.
By contrast, AI-linked and large technology stocks have driven 75% of the S&P 500’s (.SPX), returns between November 2022, when OpenAI launched ChatGPT, and September 2025, J.P. Morgan Asset Management said.
Major companies including Netflix (NFLX.O), ServiceNow (NOW.N), Apple (AAPL.O), Amazon.com (AMZN.O), Nvidia (NVDA.O), and Walmart (WMT.N), have split their shares in recent years as they pushed deeper into the megacap ranks.
"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," said Christine Short, head of research at Wall Street Horizon.
Retail appetite for Big Tech has surged this year. So far in 2025, retail investors have poured 34% more capital into Netflix than in all of 2024, while Alphabet (GOOGL.O), has drawn 19% higher inflows, according to VandaTrack.
Meta (META.O), Tesla (TSLA.O), and Nvidia have also recorded increases of 19%, 13% and 10%, respectively.
Reporting by Niket Nishant in Bengaluru; Editing by Tasim Zahid
