Glossary
Stock split
A change that multiplies a company’s share count and divides its share price by the same factor, leaving the total value of every holding unchanged.
On this page
A stock split increases the number of a company's shares by a fixed ratio and cuts the price per share by the same ratio. In a 2-for-1 split, every share becomes two, each worth half as much. Nothing about the business changes, and neither does the value of your stake or your percentage ownership. Companies split mainly to bring a high share price down to a level more investors and employees find convenient.
How it works
The board announces the ratio and the date. After the split, your broker shows the new share count and the exchange shows the adjusted price. Cost basis per share is divided by the ratio, and per-share figures such as earnings per share and dividends per share are restated so history stays comparable. Charting services, Finabase included, show split-adjusted prices, so a chart does not show a fake 90% collapse on split day.
What it does not do
A split does not make a stock cheaper in any meaningful sense; it is like changing a $20 bill for two tens. Studies have found that stocks sometimes rise after split announcements, but that is usually attributed to the confidence the split signals, not to the split itself. With fractional shares now widely available, the practical reason for splits has weakened.
The opposite move, combining shares to raise the price, is a reverse split, and it is often a sign of a struggling, low-priced stock rather than a strong one.