This Century-Old Financial Giant's Reverse Stock Split Leaves Investors Puzzled

Thomson Reuters (TRI 0.84%) is a large business information services company. The company has been performing very well lately, with revenues up 10% year over year in the first quarter of 2026. Earnings rose 7%, and the company announced a 10% dividend hike during the quarter. However, something odd was announced in May: a big special dividend coupled with a highly unusual stock split. What's going on?

Thomson Reuters is doing something odd

Reverse stock splits are usually a bad sign. Reverse stock splits often occur because a company is at risk of being delisted from a major stock exchange due to a low stock price (typically below $1 per share), an event that would make raising capital dramatically more difficult. Companies in this position will normally do something like exchange 10 shares of stock for one new share. By contrast, regular stock splits are typically considered a good sign, with companies often splitting one share into two.

The truth is that neither transaction actually changes the percentage of a company that a shareholder owns. It only changes the number of shares owned and the price of each share. But what should investors make of Thomson Reuters very unusual split, where each old share is being exchanged for 0.98456 new shares?

Thomson Reuters is returning value to shareholders

Thomson Reuters' reverse stock split has to be looked at in conjunction with the $1.44-per-share special dividend it announced at the same time as the stock split. That cash relates back to the company selling its financial and risk business to London Stock Exchange Group and then Thomson Reuters selling its holdings of that company's stock over time.

The sale of the financial and risk business actually took place in 2021 and was an all-stock deal. It turned Thomson Reuters into the largest shareholder in London Stock Exchange Group. Thomson Reuters began selling shares in London Stock Exchange Group a couple of years later, completing the process in 2024. The special dividend was an effort to return value to shareholders, with the odd split intended to adjust for the dividend payment, with the company noting that it was "proportional to the special cash distribution."

Thomson Reuters' stock split is nothing to get excited about

At the end of the day, Thomson Reuters' stock split is weird, and perhaps a little annoying if you like to hold a round number of shares. But it doesn't actually change your percentage ownership in the company, and, when considered alongside the special dividend, it is simply a way to return cash to shareholders. That's something a company does when it doesn't believe it has the opportunity to invest that cash more effectively.

This actually turns this odd event into something to be pleased by, since it shows that Thomson Reuters is basically being a good steward of your capital. If you still have that cash sitting in your account, you may even want to consider reinvesting in Thomson Reuters.