A stock split is a corporate action where a company divides its existing shares into multiple new shares, increasing the total number of outstanding shares...
The primary purpose of a stock split is to make a company's shares more affordable and accessible to a wider pool of investors, thereby increasing liquidity and potentially boosting trading volume. It often signals a company's confidence in its future growth.
Immediately after a stock split, the total value of an investor's holdings in that company remains unchanged. While the number of shares owned increases, the price per share decreases proportionally, balancing out the total value.
While a stock split itself is a mechanical adjustment and doesn't inherently change a company's financial fundamentals, it is often performed by companies with high stock prices, suggesting sustained growth and strong market demand which can indicate financial health.
A stock split increases the number of shares and decreases the price per share, often to make them more accessible. A reverse stock split, conversely, reduces the number of shares and increases the price per share, typically to meet exchange minimum price requirements or improve market perception of a low-priced stock.