Stock split

A type of corporate action where a company's existing shares are divided into multiple shares. Although the amount of shares outstanding increases by a specific multiple, the total dollar value of the shares remains the same compared to pre-split amounts, because no real value has been added as a result of the split.

In the U.K., a stock split is referred to as a "scrip issue", "bonus issue", "capitalization issue" or "free issue".

Investopedia Says:
For example, in a 2-for-1 split, each stockholder receives an additional share for each share he or she holds.

One reason as to why stock splits are performed is that a company's share price has grown so high that to many investors the shares are too expensive to buy in round lots.

For example, if a XYZ Corp's shares were worth $1,000 each, investors would need to purchase $100,000 in order to own 100 shares. Whereas, if each share was worth $10 each, investors only need to pay $1,000 to own 100 shares.

Related Links:
Be a savvy investor - learn how corporate actions affect you as a shareholder. What Are Corporate Actions?
We explain what they are, the thinking behind them as well as their results. Understanding Stock Splits

Issuance of a substantial amount of additional shares, thus reducing the par value of the stock on a proportionate basis. No journal entry need be made, because the company's accounts do not change. However, there should be a memorandum entry describing the stock split. A stock split is often prompted by a desire to reduce the market price per share in order to stimulate investor buying. Assume XYZ Company has 1000 shares of $20 par value common stock. The total par value is thus $20,000. A two-for-one stock split is issued. There will now be 2000 shares at a $10 par value. The total par value remains at $20,000. Typically, the market price per share of the stock should also drop to one-half of what it was before the split.

A dividing up of the outstanding shares of the corporation into a greater number of units without disturbing the stockholder's original proportional participating interest in the corporation. 574 P. 2d 960, 969. Stock split involves no change in the capital account, while a "stock dividend" involves a transfer of accumulated earnings to the capital account. 328 A. 2d 311, 321. In the event of a corporate "stock split," no change is made in any corporate accounts, and although more shares are issued to present holders by reducing par (or stated) value, there is no distribution in any sense. 197 A. 2d 1, 7.

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A stock split or stock divide increases or decreases the number of shares in a public company. The price is adjusted such that the market capitalization of the company remains the same after the split, so that dilution does not occur. Options and warrants are included.

See also

• Reverse stock split
• Share dividend
• Share repurchase also known as stock buyback
• Berkshire Hathaway class A common stock, which has never had a stock split, has at times been valued at over US$140,000 per share.
• Market depth

A stock split is a decision by the company's board of directors to increase the number of shares that are outstanding by issuing more shares to current shareholders.

External links

• Stock split calendar showing prices pre-split and post-split
• Profiting From Special Situations Like Stock Splits
• Stock split calendar for U.S. companies
• Stock split and reverse split examples for shareholders
• Swiss stock split calendar for European companies and worldwide companies incl. U.S. companies (in German)

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