Historical Stock Split Information

Whenever a company is publically traded, they divide their company up into shares that they sell on the stock market. These shares are governed by the board of directors. In some cases the board of directors can choose to split the shares in a 2-for-1 split. When this occurs, each shareholder gets two stocks instead of one. Let's look at an example, if a company has 20 billion shares, they would have 40 billion after a 2 for 1 split.

When a 2 for 1 split occurs, shareholders may experience a slight change in the value of their stocks. Because there are more stocks on the market, each individual stock will be worth less. A good rule of thumb in this situation is that each share will now be worth half as much. However, the market capitalization does not change.

The most common situation that causes a stock split is when a company's share price either goes up way to high to be reasonable on the market, or is too high to be compared to similar companies in their field. The point of a split is to make their shares more appealable than their competition's when customers are looking to make a purchase.

Some companies avoid splitting their stock because a split often results in a dramatic drop in the price for each stock after the split. Some investors lose faith in the company. Luckily, the decrease is often followed by an increase where small investors purchase a lot of stock at the lower price. This drives up demand and brings the price up.

If companies don't want to deal with the issues that come with a stock split, they can order a reverse split. In this case stocks are condensed into a single stock. Instead of splitting one stock into two, two stocks become one. Companies often complete reverse splits when they need to gain a reputation for being a good stock, or desperately need to prevent being delisted.

In conclusion, stock splits are one of the tools that companies use to increase their stock prices or increase the number of stocks on the market. They make stocks more accessible to people with a limited budget, and therefore make the company look more popular.