How does a 2-for-1 stock split actually work?
A 2-for-1 split means that a new share of stock is issued for each share in existence prior to the split. After the split, each share is worth half of what it was worth immediately prior to the split but the total monetary value of the shares is the same as before the stock split. Here’s an example: Let us assume that prior to the stock split, a shareholder owned 100 shares of HP common stock and let’s also assume that the market price of HP stock was $50 per share, so that the investment in HP was worth $5,000.00. Immediately after the split, the investor will own 200 shares of stock, but the market price will be $25 per share. The investor’s total investment value in HP remains the same at $5,000 until the stock price moves up or down.
A. A 2-for-1 split means the investor will have twice as many shares as before, at half the market price. For example: As of the record date (August 3, 2006) if an investor owns 100 shares of CSX common stock and the market price is $60.00/share, that investor’s total value is $6,000.00. After the split, the investor will have 200 shares of stock, but the stock price will be cut in half to $30.00/share. The investor’s total investment value in CSX remains the same at $6,000.00 until the stock price moves up or down, and each investor’s proportionate interest in CSX will be unchanged as a result of the stock split.
