Stock Split

A stock split is a corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares. Although the number of shares outstanding increases by a specific multiple, the total dollar value of the shares remains the same compared to pre-split amounts, because the split does not add any real value. Essentially, a stock split is a way for companies to make their stock more affordable and attractive to investors without changing the underlying value of the company. For example, in a 2-for-1 stock split, each shareholder receives an additional share for each share they own, but the price of each share is halved. This makes the stock more accessible to a broader range of investors, potentially increasing demand and trading volume.

What is a Stock Split?

A stock split is a corporate action where a company divides its existing shares into multiple shares to increase the stock’s liquidity. This action does not change the company’s market capitalization or the total value of the shares held by investors.

How Does a Stock Split Work?

In a stock split, the company increases the number of shares outstanding by issuing more shares to current shareholders. For instance, in a 2-for-1 stock split, shareholders receive one additional share for each share they own, but the price of each share is reduced by half. This makes the stock more affordable and can attract more investors.