What Is a Stock Split?
In short
A stock split increases the number of a company's shares and lowers the price per share in proportion, leaving the company's total market value and each shareholder's stake unchanged.
In a split a company replaces each existing share with a larger number of new shares. In an illustrative 2-for-1 split, a holder of 100 shares ends up with 200 shares and the price per share is halved at the time of the split. The company is the same size, the holder owns the same fraction of it and the total value of the holding is unchanged at the moment of the split.
A reverse split does the opposite and combines shares into fewer, higher-priced ones. Companies give various reasons: a lower price per share to widen access, or for a reverse split a higher price to meet an exchange's minimum price rule. A bonus issue, which gives existing holders new shares without payment and is called a stock dividend in some markets, has a similar effect on the price per share but is a different corporate action.
Data providers adjust historical prices for splits so that a chart does not show an artificial drop on the split date. An unadjusted series shows a jump that is not a loss, and per-share figures of earlier periods, such as dividends per share, change accordingly. When a stock's price is compared across a split date, it is worth checking whether the series is adjusted.
Figures used in this guide
- 1
- illustrative split ratio, not a real transaction
- 2
- illustrative split ratio, not a real transaction
- 100
- illustrative number of shares held before the example split
- 200
- illustrative number of shares held after the example split
Each number in the text is a definition, a convention or a stated value of the source, not a market observation.
How Lzzo.com shows it
Lzzo.com takes prices and price history from its data source as delivered and applies no corporate-action adjustments of its own. A product page shows the price per share as quoted, so after a split the quoted price changes by the split ratio, and a chart that spans a split date should be read with that in mind. The dividend guide covers the other common corporate action.
Related guides
Sources
- U.S. Securities and Exchange Commission, Stock Split, Investor.gov glossary
- U.S. Securities and Exchange Commission, Reverse Stock Splits, Investor.gov glossary
Primary and official sources, named as plain text.