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Stock split

A change that divides each share into several, lowering the price without changing the company's value.

Market BasicsBeginner

Definition

In a 2-for-1 split, each holder receives two shares for every one they held and the price per share is halved. The market cap stays the same. A reverse split does the opposite, combining shares to raise the price.

Watch out for

A split is cosmetic. It does not change what the business is worth. Reverse splits are often used by struggling companies to stay above exchange minimum prices.

Example

Hypothetical exampleIf you own 10 shares at $200 and the stock splits 4-for-1, you own 40 shares at $50. Your total is still $2,000.

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