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A stock split or stock divide increases the number of shares in a company. For example, after a 2-for-1 split, each investor will own double the number of shares, and each share will be worth half as much. A stock split causes a decrease of market price of individual shares, but does not change the total market capitalization of the company: stock dilution does not occur.[1]
A company may split its stock when the market price per share is so high that it becomes unwieldy when traded. One of the reasons is that a very high share price may deter small investors from buying the shares. Stock splits are usually initiated after a large run up in share price.[2]
- ^ "Stock Splits". U.S. Securities and Exchange Commission. 2010-03-29. Retrieved 2014-06-05.
- ^ "Why Do Companies Split Stocks? - ModernAgeBank". 2023-11-24. Retrieved 2023-11-27.