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Finance Dictionary and Glossary of Investment Terms
Sometimes, companies split their outstanding shares into more shares. If a company with 1 million shares executes a two-for-one split, the company would have 2 million shares. An investor with 100 shares before the split would hold 200 shares after the split. The investor's percentage of equity in the company remains the same, and the share price of the stock owned is one-half the price of the stock on the day prior to the split.
An increase in the number of outstanding shares of a company's stock, such that proportionate equity of each shareholder remains the same. This requires approval from the board of directors and shareholders. A corporation whose stock is performing well may choose to split its shares, distributing additional shares to existing shareholders. The most common split is two-for-one, in which each share becomes two shares. The price per share immediately adjusts to reflect the split, since buyers and sellers of the stock all know about the split (in this example, the share price would be cut in half). Some companies decide to split their stock if the price of the stock rises significantly and is perceived to be too expensive for small investors to afford. also called stock split.
A stock split occurs when a company decides to divide its share in two, three, four or more. Thus a stock worth $100 might be the subject of a 2-for-1 split, resulting in a share price of $50. Holders in this case get twice as many shares but each is worth half as much, and since nothing else about the company has changed, shareholders aren''t better or worse off. Stock splits traditionally are seen as a good sign; companies split their shares when the price of each share is considered high enough to discourage ownership. But there is little evidence that splits do shareholder much good. Reverse stock splits (in which you get fewer shares, but each is worth proportionately more) do occur, but rarely.
The division of outstanding shares of a corporation into a larger number of shares. For example: in a 3-for-1 split, each holder of 100 shares before would have 300 shares, although the proportionate equity in the company would remain the same. A reverse split occurs when the company reduces the total number of outstanding shares, but each share is worth more.