If you’re a shareholder in General Electric (GE) stock, you will likely notice something unusual when the markets open on Monday. Shares in the multinational company are suddenly worth eight times what they were worth on Friday.
Don’t get too excited, though. It’s just a little accounting sleight of hand. GE did what’s known as a reverse stock split, which is when a company reduces its outstanding shares to prop up their value. So while the amount of shares you own might be worth more, you own fewer of them.
Why did GE do this? According to the company, GE’s business has changed so drastically over recent years—mainly through major divestments from firms like NBCUniversal and GE Oil and Gas—that this reduction in shares was warranted.
In December, GE also agreed to pay $200 million to settle a widespread fraud case led by the Securities and Exchange Commission, although it didn’t admit to any wrongdoing.
GE has made strides in recent years to work off its notoriously high debt load, so it’s not surprising that the embattled company wants to look forward now.
“The purpose of the reverse stock split is to reduce the number of our outstanding shares of common stock, and to increase the per share trading price of our stock to levels that are better aligned with companies of GE’s size and scope and a clearer reflection of the GE of the future, not the past,” the company explains in a fact sheet.
The reverse stock split was recommended by the GE board in March. GE announced that it would proceed with the eight-to-one split in June. Shares of GE closed at $12.95 on the New York Stock Exchange on Friday. They are set to open at $103.75 as of early Monday morning.
Note: A stock split does not, in itself, affect a company’s market value, although it can sometimes boost a company by appealing to investors who are attracted to the new price. However, if you’re a current shareholder whose number of shares can’t be divided evenly into eight, you are entitled to a cash payment for the outstanding portion, according to GE.
As of late last month, GE had a “poor” composite rating of 54 out of 99, according to IBD.
You can learn more about its reverse stock split here.
This story has been updated to clarify that the split was recommended by the GE board in March.