What is meant by Stock Split ?

  • A company increases the number of shares that are outstanding by issuing more shares to existing shareholders. For example, in a 2-for-1 stock split, every shareholder holding one share is given an additional share. In such a case, the face value of the share is reduced (say from ` 10 to 5 per share).
  • Companies stock’s price is also affected by a stock split. After a split, the stock price of the company reduces since the number of outstanding shares increases, however the market capitalization remains the same.

 

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