Stock Split
A stock split occurs when a company increases the number of its shares while reducing the price per share, keeping the total market value unchanged.
Common Types of Stock Splits:
- Forward Stock Split (e.g., 2-for-1, 3-for-1): Increases the number of shares while reducing the share price proportionally
- Reverse Stock Split (e.g., 1-for-10): Reduces the number of shares while increasing the share price
Why Companies Do Stock Splits:
- Make shares more affordable for retail investors
- Increase liquidity by attracting more traders
- Signal confidence in growth without changing fundamentals
While stock splits do not directly impact a company’s valuation, they often generate investor interest and can lead to increased activity.