Corporate actions
Stock split
Dividing existing shares into more, smaller shares, leaving the total value unchanged.
How it works
In a two-for-one split, every share becomes two and the price halves. You own twice as many shares worth the same in total, and the company is worth exactly what it was.
Companies split to keep the share price in a range they consider accessible. A reverse split does the opposite, usually to avoid falling below an exchange’s minimum price.
Where it misleads people
Splits change your cost basis per share and any standing orders. A limit order left at the pre-split price becomes nonsense, and a reverse split in particular is usually a sign of distress rather than a neutral event.
Worked example
Holding 100 shares at $600 before a three-for-one split leaves you with 300 shares at $200. Value unchanged at $60,000.
Related terms
- Cost basisWhat you actually paid for a holding, including fees — the number every gain or loss is measured from.
- Adjusted closeA historical closing price restated to account for dividends and splits, so returns compare fairly over time.
- ShareOne unit of ownership in a company — the smallest slice of its equity you can hold.
- Good-till-cancelledAn order that stays live across sessions until it fills or you cancel it.
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Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.