What is a stock split?
A stock split is a company action that increases the number of a companys outstanding shares by dividing or splitting its current outstanding shares. There are two things to remember that happen in a stock split, By dividing the shares, the price of the shares is reduced immediately after the stock split. The company or stocks market capitalization remains the same. To understand a stock split, consider this common example: You have a 20-pound bill and someone offers you two 10-pound bills for it. As you can see, an exchange will not make a difference to the total value of what you had. The most common stock splits are 2 for 1, 3 for 2 and 3 for 1. A company is trading at 40 pounds and has 10 million shares issued. The market capitalisation of the company is 40*10 = 400 million pounds. The company offers a 2 for 1 stock split. This would give one share for each share currently owned by the shareholder. The stock split would leave the new value of the company shares at 20 pounds per sha
The division of outstanding shares of a corporation into a larger number of shares (forward split) or a smaller number of shares (reverse split). For example: in a 3-for-1 forward split, a holder of 100 shares would receive 300 shares of the post-split security, In a 1-2 reverse split, a holder of 100 shares would receive 50 shares of the post-split security. In both examples, the proportionate equity in the company would remain the same.
