What is 3 for 2 stock split? Why do they do that?

Question

Do we benefit from that?
A couple days ago, Nke stock suddently went down about half, was that the split? Do I lose money from that?
What are other splits?

Answer 1

Bottom line: you get 3 shares for every 2 you had before. So, multiply your shares by 1.5 and you have that many more. They reduce the price per share by the same ratio, so you essentially have exactly the same amount of money as before in the stock, until the stock price changes again.

Why do they do it? There are many possible reasons. They may have wanted more shares free to distribute to executives and employees. They may be trying to manipulate the long term price by bringing it into a more affordable dollars per share category. This is false economy though, because almost nobody buys one share unless it's for a baby and they frame it.

The most common split is simply a split, 2 for 1. the price drops in half and you get twice as many shares. There are also 3 for 2's, and although I'm not familiar, there may even be 3 for 1's or 4 for 1's if there's been a huge and stable run up.

Something to always watch for, that is almost never a good thing, and if you see it, you might want to run the other way, is when they take 5 or 10 shares, and recombine them into one. Usually something that has declined into the penny stock range and have gotten themselves delisted will do this in order to get relisted on nasdaq.

Good luck with your investing
Kevin

Answer 2

3 For 2 Stock Split

Answer 3

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Say you had a $100 bill and someone offered you two $50 bills for it. Would you take the offer? This might sound like a pointless question, but the action of a stock split puts you in a similar position. In this article we will explore what a stock split is, why it's done and what it means to the investor. A stock split is a corporate action that increases the number of the corporation's outstanding shares by dividing each share, which in turn diminishes its price. The stock's market capitalization, however, remains the same, just like the value of the $100 bill does not change if it is exchanged for two $50s. For example, with a 2-for-1 stock split, each stockholder receives an additional share for each share held, but the value of each share is reduced by half: two shares now equal the original value of one share before the split. Let's say stock A is trading at $40 and has 10 million shares issued, which gives it a market capitalization of $400 million ($40 x 10 million shares). The company then decides to implement a 2-for-1 stock split. For each share shareholders currently own, they receive one share, deposited directly into their brokerage account. They now have two shares for each one previously held, but the price of the stock is split by 50%, from $40 to $20. Notice that the market capitalization stays the same - it has doubled the amount of stocks outstanding to 20 million while simultaneously reducing the stock price by 50% to $20 for a capitalization of $400 million. The true value of the company hasn't changed one bit. The most common stock splits are, 2-for-1, 3-for-2 and 3-for-1. An easy way to determine the new stock price is to divide the previous stock price by the split ratio. In the case of our example, divide $40 by 2 and we get the new trading price of $20. If a stock were to split 3-for-2, we'd do the same thing: 40/(3/2) = 40/1.5 = $26.6. It is also possible to have a reverse stock split: a 1-for-10 means that for every ten shares you own, you get one share. Below we illustrate exactly what happens with the most popular splits in regards to number of shares, share price and market cap of the company splitting its shares.

Answer 4

A stock split is usually a good sign from an investment. You dont lose money when a stock splits. For example if you have buy 20 shares at 5 dollars each, you have invested $100. If the stock splits and give you 2 shares for every 1 (so now you have 40 shares) and the price of the stock drops to $2.50 per share you still end up with $100.

Now you have more stocks in Nike, so if the price goes up $1, you get 3$ instead of 2$ for the same amount of shares because for every 2 stocks you have, you get 3.

Another example of how stock splitting is good. Southwest Airlines stock has split 14 times over the past 40 or so years. If it split 2 to 1 each time and you only bought 1 share at the time, you would now have around 16,300 shares. And the price hovers between 15 - 20 dollars a share....you do the math.

Answer 5

You don't lose money from that. If you had 200 shares to start with, then you would end up with 300 shares. The price now would be 2/3 as much. Bottom line you end up the same. They do stock splits often because the price of the stock is getting too high. For example, if you are a small investor and the stock price is $150 vs. let's say $60, it's easier to invest the amount you want when the price is lower.

Answer 6

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RE:
What is 3 for 2 stock split? Why do they do that?
Do we benefit from that?
A couple days ago, Nke stock suddently went down about half, was that the split? Do I lose money from that?
What are other splits?

Answer 7

No, you dont lose anything. A split is just the companies way of attracting new buyers of the shares by keeping the price low so that more people will buy it. There are may vaiations of splits: 2for1, 5for2, 5for3, or any other variation. There is also a reverse split: 1for10, 5for1000 etc.. they do that to
a)keep the price higher so they wont be delisted
b)squeeze out odd lot share holders that hold less than 100 shares & costs them too much to bookkeep, so they reverse & then immediately split--ex. 1for100 & then 100for1 at the same time. So anyone with less than 100 shares, gets cashed out.

In your case, its pretty much a non event. Instead of 100 shares at $30, you have 133 shares at $20.10. The one good thing that does happen though, is when a split is announced, it sometimes drives the shares up 1st, then it splits. So it might go from $30 to $35 & then split.

Answer 8

You don't loose money, but it's not good for investors. The reason for that is because if the company earned a total of 1 million, and had 1 million shares outstanding, then each share would be entitled to $1 of the earnings. However, after the split, the 1 million in earnings is now split over 1.5 million shares, so the entitlement drops to $.67. You have more shares, but eventually, there isn't enough earnings to go around, and the demand for the stock will fall, and the price will also fall.

you can look to sites like economicinvest.com for help and guidance in investing, to avoid loosing money in these situations.

Answer 9

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Answer 10

You didn't lose money, you gained shares. For every two shares they gave you another one. If you had 200 shares at $50, you now have 300 shares at $33.33. It works out the same for you.

They do this as share prices get too high for the average investor, it's to keep the prices attractive. When that is the case, more people will by shares and the stock price will go up.