Stock Split

In a 2-for-1 split, each shareholder receives two new shares for every one they held. The share price roughly halves, so the total value of each holding stays the same.

For example, an investor owns 100 shares priced at 80, worth 8,000 in total. After a 2-for-1 split, they own 200 shares priced at about 40, still worth 8,000.

Companies usually split their shares when the price has risen to a high level. A lower share price can make shares feel more affordable to individual investors and may improve trading liquidity, although the ability to buy fractional shares through many brokers has made this less important.

A stock split does not change the company's market capitalization, earnings or the proportion of the company each investor owns. Per-share figures, such as earnings per share and dividends per share, are adjusted to reflect the new number of shares.

A reverse stock split works the opposite way, combining several shares into one to raise the share price. Companies sometimes do this to avoid falling below an exchange's minimum price requirement.