What is a stock split?
Short answer
A stock split divides each existing share into several shares, lowering the price per share in proportion. A 2-for-1 split doubles the number of shares and halves the price, leaving the company’s total value unchanged.
How a split works
In an N-for-1 split every shareholder receives N shares for each one held, and the price per share is divided by N. Illustrative arithmetic: someone holding 100 shares at 200 each (a value of 20,000) holds 200 shares at about 100 each after a 2-for-1 split, still worth about 20,000. Ownership percentage and the company’s market capitalisation do not change as a result of the split itself.
New share count = old share count x N; new price = old price / NWhy companies do it
Common reasons are to make a high share price more accessible to small investors and to make trading and employee stock plans easier. Well-known examples include Apple’s 4-for-1 split in August 2020 and Nvidia’s 10-for-1 split in June 2024. A split does not change a company’s earnings or assets.
Reverse splits, bonus issues and sub-divisions
A reverse split combines shares, for example 1-for-10, raising the price per share; companies sometimes use it to meet exchange listing rules. In India, a split is done by sub-dividing the face value of the share, and a bonus issue gives extra shares free from reserves. Both increase the share count and reduce the price, but they are separate corporate actions. Data providers adjust historical prices for splits so charts stay comparable.