Stock split

In a stock split, a company increases the number of its shares by a fixed ratio and the share price adjusts in proportion. In a 2-for-1 split, each shareholder receives two new shares for every one held, and the price roughly halves. The company's market capitalisation, each investor's percentage ownership and the value of each holding are unchanged; the cake is simply cut into more slices. Per-share figures such as earnings per share and dividends per share are adjusted by the same ratio, and historical price charts are restated so that past prices remain comparable.

Companies usually split their shares after a big price rise, to bring the price back to a level that feels more accessible to individual investors and employees. With many brokers now offering fractional shares, the practical benefit is smaller than it once was. A split does not create value, although it is sometimes read as a sign of management confidence. The reverse operation, a reverse split or share consolidation, combines several shares into one; it is often used by companies whose share price has fallen very low, sometimes to meet an exchange's minimum price requirement.