Peninsula Minerals Ltd.s authorized share capital consists of an unlimited number of common shares, with 9.3 million outstanding. After some early successes, the company has failed to locate new mineral deposits and has also decreased its estimates of the amount of minerals in existing mines. As a result, earnings per share and the share price have been declining and are currently $0.17 and $0.68 per share, respectively. Peninsula Minerals is considering a reverse stock split (one that decreases the number of shares outstanding instead of increasing them) of one-for-three.

Why would any company want to reverse split its shares? What would be the likely effect of the reverse split on the earnings per share and share price?

Would repurchasing shares achieve the same result as a reverse split? What is the likely reason that management prefers a reverse split over repurchasing shares?