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stock split

definition

A measure taken by a company to increase in the number of its outstanding shares without altering its market capitalization or the ownership stake for each shareholder. A stock split is accomplished by dividing each share by a set ratio. In a two for one (2:1) split, for example each share is split into two shares. Therefore, an investor who owns 100 shares of a security that is trading at $80 before the split will own 200 shares of the same security after the split, with each one priced at $40. A company will typically announce a stock split whenever its stock price rises to a level that discourages investor interest. Compare to Reverse Stock Split.

Related Terms

 • reverse stock split  • bonus issue