Written by - What is a Stock Split? A stock split occurs when a company issues additional shares to shareholders, increasing the number of shares in circulation while maintaining the same overall value. For example, in a 2-for-1 stock split, shareholders receive one additional share for each share they already own.
- Why Do Companies Split Their Stocks? Stock splits are typically used by companies whose share prices have risen significantly. By splitting the stock, they make shares more affordable and accessible to a broader range of investors.
- Impact on Shareholders: While the number of shares increases, the total value of your investment remains unchanged. For example, if you owned 100 shares worth $100 each, after a 2-for-1 split, you would own 200 shares worth $50 each. The total value of your investment is still $10,000.
- Market Perception: Although stock splits don’t alter the intrinsic value of a company, they can influence market perception. Investors may view stock splits as a sign of a company’s confidence in its future performance.
- Tracking Your Investments Post-Split: Always adjust your investment tracking to account for the new number of shares. Additionally, stock splits might impact dividends, with the amount of dividend payments adjusted accordingly.
*Disclaimer: The content in this post is for informational purposes only. The views expressed are those of the author and may not reflect those of any affiliated organizations. No guarantees are made regarding the accuracy or reliability of the information. Use at your own risk.