orig. post on Quora
Dan Walter’s Answer
If the company does a reverse split (the number of outstanding shares is reduced and the stock price is increased) then the strike price of options will usually go up accordingly. This is very common when a company does an IPO. Often it is required to get the publicly tradeable stock to a price range that is consistent with a typical offering. For example imagine you have 50,000,000 outstanding shares and your value is $150M. Your stock price would be $3. But, you would need that price to be $15-30 for a typical IPO. With a value of $150M you would need to have only 10,000,000 shares outstanding to have a “per share” price of $15. So you would do a reverse stock split and everything associated with the price, including historical grant prices, would also change.
Leave a Reply