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Common Stock Splits An easy way to determine the new stock price is to divide the previous stock price by the split ratio. Using the example above, divide $40 by two, and we get the new trading price of $20. If a stock does a 3-for-2 split, we'd do the same thing: 40/(3/2) = 40/1.5 = $26.67.
A stock split is a decision by a company's board of directors to increase the number of shares that are outstanding by issuing more shares to current shareholders. The primary motive is to make shares seem more affordable to small investors even though the underlying value of the company has not changed.
Stock Splits are a great way for the average investor to accumulate an increasing number of shares in companies they have invested in, long term wise this is a seriously good move. The value of the shares will increase and your small investment can, in time turn out to be worth millions.
A stock split is a corporate action in which a company divides its existing shares into multiple shares. Basically, companies choose to split their shares, so they can lower the trading price of their stock to a range deemed comfortable by most investors and increase liquidity of the shares.
Locating the Date of the Split Identify the date in the Payable Date column. A company distributes the additional shares for the split on this date. In this example, if the payable date is June 1, the company would complete the split on that date. Identify the date in the Ex Date column.
Not quite. The company's market capitalization, equal to shares outstanding multiplied by the price per share, isn't affected by a stock split. If the number of shares increases, the share price will decrease by a proportional amount. If a stock traded at $100 previously, it will trade at $50 after a 2-for-1 split.
To calculate the number of new shares you will have after a stock split, multiply the number of shares you currently own by the number of new shares being issued for each existing share. For example, say a company that you own 150 shares of is doing a 2-for-1 stock split.
Advantages for Investors One side says a stock split is a good buying indicator, signaling the company's share price is increasing and doing well. While this may be true, a stock split simply has no effect on the fundamental value of the stock and poses no real advantage to investors.
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