STOCK SPLITS
Plain English
A stock split is like cutting a pizza into more slices. A 2-for-1 split doubles your shares but halves the price. You own the same total value — just more pieces. Companies split to make shares more affordable for retail investors.
Going deeper
In a stock split, a company increases its number of shares outstanding while proportionally reducing the price per share. In a 4-for-1 split, 100 shares at $400 become 400 shares at $100. Total value stays the same. Forward splits (2:1, 3:1, 4:1) make shares cheaper. Reverse splits (1:10) make shares more expensive and are often seen with struggling companies trying to stay above exchange minimum price requirements. Splits don't change the company's fundamentals or your ownership percentage. However, they can increase liquidity and attract more retail investors.
Examples
Forward Split
Apple announces a 4:1 split. You own 25 shares at $500 each ($12,500 total). After the split, you own 100 shares at $125 each ($12,500 total). Same value, more shares, lower price per share.
Reverse Split Warning
A penny stock trading at $0.50 does a 1:10 reverse split. Your 1,000 shares at $0.50 ($500) become 100 shares at $5.00 ($500). The company did this to avoid being delisted. Reverse splits are often a red flag.