Stock Split Information | Company Stock Split | Definition

Stock Split Information

Company Stock Split Information | Definition

Dividing the capital stock of a corporation to create more shares, primarily to improve marketability and heighten investor interest. Stock splits generally are on a two-for-one basis (two shares of new stock are made exchangeable for one share of old). For example, a two-for-one split would leave the owner of 100 shares of old stock worth $90 per share with 200 shares of new stock worth $45 per share. All a split actually does is increase the number of outstanding shares.

Outside the US the terminology may vary. For example, in the UK, a one-for-one split means one additional share is issued for each existing share, so an investor with one share ends up with two after the split, equivalent to the US two-for-one term.

The opposite of a split is a reserve split, whereby a company shrinks its stock base by issuing fewer shares to each holder in return for turning in the old ones. Reverse splits are usually due to adverse earnings trends with too much stock outstanding.

For over 1,000 additional terms and definitions please see our Investment Glossary Guide.

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