WHAT IS A STOCK SPLIT? 📈 Stock Splits Explained

TL;DR

A stock split is when a company increases the number of outstanding shares to make the stock price seem more affordable, attracting more investors.

Transcript

so they were going to be talking about a stock split so I had somebody reach out to me and asked me about a reverse stock split and they wanted me to basically explain what exactly that was and to be honest with you until somebody mentioned that to me I wasn't even really aware that that was something that existed but it's very funny because coinci... Read More

Key Insights

• 💨 Stock splits are a way for companies to make their stock seem more affordable to investors.
• 🥳 The value of a stock is not determined by its price per share but rather by its price to earnings ratio.
• 🥺 Stock splits can lead to an increase in the price per share due to increased demand from investors.
• ✋ Companies may choose to split their stock if the price per share is too high compared to other companies in the sector.
• 🙈 Stock splits are seen as a sign of confidence in the company's future performance.
• 🥹 Shareholders typically receive more shares for each existing share they hold during a stock split.
• 🔰 Stock splits can attract beginner investors who perceive the stock as more affordable after the split.

Questions & Answers

Q: What is a stock split?

A stock split occurs when a company's board of directors decides to increase the number of outstanding shares, resulting in a lower stock price per share.

Q: How are stock splits decided?

Stock splits are decided by the company's board of directors and often require a shareholder vote. If the vote passes, the shares are split in a specific ratio.

Q: What is the purpose of a stock split?

The purpose of a stock split is to make the stock price seem more affordable to investors, attracting more interest and potentially increasing demand for the stock.

Q: Does a stock split change the value of the stock?

No, a stock split does not change the value of the stock. The market capitalization remains the same, and only the number of outstanding shares and price per share change.

Summary & Key Takeaways

• A stock split occurs when a company's board of directors decides to increase the number of outstanding shares.

• The split ratio determines how many new shares shareholders receive for each existing share they hold.

• Stock splits are often done to make the stock price seem more affordable to investors and can lead to an increase in the price per share.