Stock Split

A stock split increases the number of outstanding shares by issuing additional shares to existing shareholders proportionally. In a 2-for-1 split, shareholders receive one additional share for each share owned, and the stock price is halved. The total value of the investment remains the same immediately after the split.

Companies typically split their stock when the share price has risen significantly, making shares more accessible to small investors. For example, if a stock trading at $1,000 does a 10-for-1 split, the new price becomes $100 per share, which may attract more retail investors.

Reverse stock splits work in the opposite direction, consolidating shares to increase the price. Companies use reverse splits to meet exchange listing requirements or improve the stock's perception. While splits do not change fundamental value, they can increase liquidity and trading volume.