2007-02-05 21:29:50 · 9 answers · asked by Anonymous in Business & Finance ➔ Investing
There are two reasons to split the face value of the share.
1. When the price of the share is so much in the mind of the public, and people do not want to trade in that share hence the liquidity of sale and purchase reduces. To increase the liquidity in the market. the face value is reduced by the companies
2. To make the fool of the investors because some of the investor is vigilent about the split system.
2007-02-05 23:51:57 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Its a total psycological move on the part of the issuing company. When you split your shares, you have more shares outstanding. However, they shares also decrease in value so you the net value of said shares remains the same. The reason, however, that this is done is that the price per share generally declines. This make a purchase more attractive to the general investor. It can work out well if you hold the shares for some time (buy & hold strategy) and they increase in value.
2007-02-06 10:17:59 · answer #2 · answered by pepper_0713 2 · 0⤊ 0⤋
The best way for a company to raise capital (cash) is by issuing more shares. When a stock is selling at a relatively high price they find it advantageous to issue more shares and therefore raise more capital.
In a 2:1 stock split they're in fact issuing stock for half the market price. Effectively raising their cash account.
2007-02-06 09:30:35 · answer #3 · answered by Anonymous · 0⤊ 0⤋
There is not a logical ( for me. ) answer to this...They do it to make the shares more affordable to ALL investors ( Look at googles share price??? ) The % comes out the same any way way you look at it. ( I have owned GOOG.On and off. ) Also, to create interest in the stock. You are by FAR not the first person to ask this Q. Y.M.T.I. A.M.Br..10 years 1,000,000. in stock trades..........I have to go to bed,and get ready for the 9:30 market open!!!
2007-02-06 06:21:01 · answer #4 · answered by cr-bren 2 · 0⤊ 0⤋
companies split their shares for more liquidity in the market and companies want to increase their market captilisation
2007-02-06 05:34:01 · answer #5 · answered by nitin b 1 · 0⤊ 0⤋
Simple......
Keep the stock from reaching a price point that is unreachable.
The MOST EXPENSIVE PUBLICLY TRADED STOCK is in the USA. Let me check current prices.....
$109,000.00 as of 2/6/2007!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
How many of these shares can you or I buy?
Hope the point is clear on why do we need to split shares.
KKP
2007-02-06 17:09:45 · answer #6 · answered by KKP_Investor 3 · 0⤊ 0⤋
when the share price is very high, the liquidity becomes low. so increase the liquidity the share ll be divided.
2007-02-06 05:47:46 · answer #7 · answered by Partha 2 · 0⤊ 0⤋
Tax invasion
2007-02-06 05:35:44 · answer #8 · answered by Expression 5 · 0⤊ 0⤋
to increase liquidity
2007-02-06 11:07:28 · answer #9 · answered by delta 7 · 0⤊ 0⤋