Reverse splits are usually defensive. Exchanges require a minimum bid price, commonly $1, and a company facing a deficiency-notice can fix the price by consolidating shares. The business is unchanged, so the arithmetic is neutral on day one.
Empirically they are a poor sign. The problem that pushed the price under $1 is usually still there, and many companies that reverse split are back below $1 within a year while having created room under authorized-shares for more dilution.
Example: 8,000 shares at $0.35 is $2,800. A 1-for-20 reverse split leaves 400 shares at $7.00, still $2,800. Odd shares are usually settled in cash rather than fractions.
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