What usually happens to a stock after a stock split?
Stock split refers to a corporate action that increases the number of shares in a public company. The price of the shares are adjusted such that the before and after market capitalization of the company remains the same and dilution does not occur. Options and warrants are included. Take, for example, a company with 100 shares of stock priced at $50 per share. The market capitalization is 100 × $50, or $5000. The company splits its stock 2-for-1. There are now 200 shares of stock and each shareholder holds twice as many shares. The price of each share is adjusted to $25. The market capitalization is 200 × $25 = $5000, the same as before the split. Ratios of 2-for-1, 3-for-1, and 3-for-2 splits are the most common, but any ratio is possible. Splits of 4-for-3, 5-for-2, and 5-for-4 are used, though less frequently. Investors will sometimes receive cash payments in lieu of fractional shares. It is often claimed that stock splits, in and of themselves, lead to higher stock prices; research
