Written by A stock split is a corporate action where a company issues additional shares to shareholders, increasing the total number of shares outstanding while maintaining the overall value of the investment. For example, in a 2-for-1 stock split, an investor who holds one share of a company will now hold two shares, but the price per share is halved.
The total value of the investor’s holdings remains the same immediately after the split, as the price per share decreases in proportion to the increase in the number of shares. However, stock splits can signal that a company’s share price has increased significantly, and the company wants to make its shares more affordable and accessible to a broader range of investors.
Stock splits don’t change the value of the company or affect its fundamentals, but they can improve liquidity and make the stock more attractive to smaller investors. Companies like Apple and Tesla have conducted stock splits in the past as their stock prices grew to high levels.
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