Stock Split

A stock split occurs when a company increases the number of its outstanding shares by issuing more shares to existing shareholders while simultaneously reducing the share price. The overall market capitalization of the company remains the same, but each shareholder holds more shares at a lower price per share. Stock splits are typically executed to make shares more affordable for retail investors and to increase liquidity.

Example

If a company announces a 2-for-1 stock split, a shareholder who owns 100 shares at $100 per share will now own 200 shares at $50 per share, but the total value of the holdings remains unchanged.