Frequently Asked Questions
What is a stock/share split?
In a stock/share split, each of the outstanding shares of a company is divided, thereby lowering the price of each share, while the total number of outstanding shares increases.
A company may conduct a stock split in order to boost the liquidity of their stock. The lowering of their stock price will make the company’s stock more affordable and may attract more investors. This is also done without actually lowering the total value. Stock splits are often viewed positively as they can be an indication of confidence in growth.
Here is a simple example of a stock/share split: Company A has undergone a 3 for 1 stock split, which means that shareholders have received 3 shares of the new stock for every 1 share that they previously owned. If the shareholder had originally owned 1000 shares before the stock split, they would now own 3000 shares after completion of the split.
If the share price was originally US$30, which means that the shareholder had a total share value of US$30,000, after the reverse split, they would still have a total share value of US$30,000 with each share being worth US$10.
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