What exactly is a stock split and how does it affect shareholders?

Answer 1

Let's imagine the company has sold 1000 shares at $10 each. The value of the outstanding shares is 10 x 1000, or $10,000.

Now let's assume they decide to do a 2 for 1 split. They give each person who owns 1 old share 2 new shares, but they change the price of each share to $5. There are now 2000 shares outstanding, but the value of the company hasn't changed:

5 x 2000 or $10,000.

The net effect is that the investor has the same amount (or share) of the company that they had before. However, the stock price is lower, and this is sometimes thought to attract new investors.

Sometimes companies will do a reverse split - that is, they exchange 2 old shares for one new one, but they double the price of each share. Again, no change to the value of the company, but sometimes a private company will do this before an IPO.

For experienced investors, a stock split is a non-event; it is meaningless, and doesn't change the company's fundamentals.

Answer 2

The board of a company decides to split the shares, thereby reducing the price. Let's say the price of the stock has risen to $100. If they do a 2 for 1 split, they will mail each shareholder one share for each share that they own. So at the end of the day, the number of shares in shareholder hands has doubled, and the price is halved. It doesn't really effect the value that the shareholders own.

Answer 3

depends on the split. I'll use PBR for an example especially since they did a recent 2-1 split. At the time of the split it was at $120 a share after the 2-1 it went back down to 60 and instead of one share you got two. They split like this to make the stock more attractive (not that this stock needs any help its a winner) so others can get iun on the action sometimes it workds and goes back up other times it doesn't. What is ALWAYS BAD is a reverse split. This is more commnly found with pink sheet garbage penny stocks. The idea of a reverse split is to make the price more attractive but then for every 2 shares you will only get one (more common reverse splits are 20+ to 1) They do this to make their stock look better but it rarely stays up and quickly falls back down to the garbage dump where it belongs.

Answer 4

The number of outstanding shares is increased and split between current shareholders. The value of a shareholders account doesn't change. For example, in a 2 to 1 split, if you owned 100 shares at $50.00 each before the split, after the split you would own 200 shares at $25.00 each.

Answer 5

A stock split is when you get a multiple of your current number of shares, and the value of each individual share goes down by that same multiple. It doesn't directly affect the shareholders, but generally makes their shares easier to sell, especially if the share price is currently very high.

For example: 2 shares for every share you have. Your shares were worth $100 each, but now they are worth $50 each. You had 100 shares, worth $10 000, now you have 200 shares worth $10,000.

Answer 6

a million. incredibly much on no account happens. 2. If the inventory splits 2 for a million, the dividend might get shrink in a million/2 yet now and back the business corporation additionally will improve the dividend on the comparable time so as that it actually would not get shrink via precisely a million/2.