2007-09-19 05:01:05 · 5 answers · asked by william p 1 in Business & Finance ➔ Investing
You get 3 shares for every 2 you have now (or you could look at it as 1.5 for every 1 you have now) and the price initially drops to 2/3 of the current price so that the total value of your investment is the same.
So, for example, if you have 200 shares of a $45 stock ($9000 total value), after the split you will have 300 shares of a $30 stock (still $9000).
If you start with an odd number of shares (e.g. 125), then you would end up with a fraction of a share after the split (125 * 1.5 = 187.5). What usually happens then is you will get 187 shares and they'll pay you cash for the value of the .5 share. Most companies only track whole shares (unless it's in a dividend reinvestment plan or something like that).
The only real benefit is a stock split generally means that the management is confident that the stock price will continue to go up.
You sometimes hear people talk about a stock split as if it's like winning the lottery and that you're suddenly rich. In reality, it's more like you gave the bank teller a $20 bill and asked for two $10s in return. You still have the same amount, it's just packaged differently.
2007-09-19 05:13:07 · answer #1 · answered by Dave W 6 · 0⤊ 0⤋
If you own 200 shares of a stock at $150 per share. After the split you will own 300 shares at $100 per share.
2007-09-19 05:41:45 · answer #2 · answered by Anonymous · 0⤊ 0⤋
You get 1.5 shares of stock based on the number of shares you own before the split.
2007-09-19 05:06:38 · answer #3 · answered by regerugged 7 · 0⤊ 1⤋
The net result is that you end up with one additional share for every two you own, with the stock price and dividend being proportionately lower..
2007-09-19 06:34:55 · answer #4 · answered by jeff410 7 · 0⤊ 0⤋
All the answers you've received are good. One more thought;
SPLITS MEAN NOTHING!
Splits are usually followed (run after) by amatuers. Be careful.
2007-09-19 07:10:57 · answer #5 · answered by Common Sense 7 · 0⤊ 0⤋