What is Stock "Split"?

i will explain these splits in a a general sense so that you understand who they work

Basically stock splits basically increase the number of stocks that the shareholders and still keeping the proportion of shares that the shareholders have. With increasing the number of shares outstanding (as in shares currently owned by investors) the value of each share falls in proportion to the increase in number of shares.

The financial jargon for stock splits is and x for y split with figures 2 for 1 split. In such a case each share that a stock holder has is divided into 2 which means that if he has 200 shares before the split, he/she will have 400 shares after the split. The further implication is that the value of the share falls by half since the shares have doubled in number. So if each share is $10 before the split, value will decrease to $5 after the split.

Another example is a 4 for 3 split. This will mean that each three shares that an investor holds will be increased to four or another way of putting it is that each 1 share becomes 4/3 of the initial. So if an investor has 300 shares before the split, she will have 400 shares after the split and the value of each share will decrease to ¾ of the initial value.

There are many ratios that the management can decide on according to the prevailing situation but the most common is a 2 for 1 split.

Just run through again if it is not well internalized…..

Value investing books like the intelligent investor have belittled this corporate gimmick saying that it just tries to make investors think that they have more shares in the company while in the real sense their standing is still the same as it was. The book uses that example that Yogi Berra saying that he wants his (whole) pizza cut up into eight pieces because he does not think that he can eat four. The authors say that these companies that split their stocks and make so much noise about this are in essence treating their investors like dolts. While sometimes this happens, sometimes it doesn’t and so lets say that the says were doubled(2 for 1 split) this will mean that each share will be entitled to half of everything that the initial share had. So In essence there is nothing that the investor benefits from s split.

Why do companies do stock splits? If a company’s stock is doing well(I prefer to think of it as the stock being grossly overpriced), the management might decide to split the stock so as to make more shares available to the public. In “the intelligent investor” curious historical examples in the internet are shown of how companies split stocks and after the devaluation the same stocks increased in value almost overnight. That means that the company will benefit from the split and the investor will profit in that he will be able to afford shares that were previously too expensive.

The down side is that the stock split in increasing the number of shares in the market means that a dilution can occur making a major loss in stock value.

Something about these stock splits is that they require approval from the Board of Directors and the shareholders(those with voting powers anyways)

There is also something called a reverse stock split but that is a story for another day.

i hope this helps

A stock split means nothing. A 3 for 2 split would mean getting three shares for every 2 you have. The price would be adjusted accordingly. It would be of no value to buy more shares unless you think the stock is a good investment and you want to add to your current holdings. Your on line broker will add the new shares to your account (in a day or more... depending on the broker and the company).

This is pretty basic stuff. It would be wise to read several books on basic investing before opening a brokerage account or committing funds to the market.

You would get 3 shares for every 2 that you own. So you now own 60 shares, but the share price is 2/3 of what it was - so you have more shares but worth the same amount of money.