Split


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Split

Sometimes companies split their outstanding shares into more shares. If a company with 1 million shares executes a two-for-one split, the company would have 2 million shares. An investor with 100 shares before the split would hold 200 shares after the split. The investor's percentage of equity in the company remains the same, and the share price of the stock owned is one-half the price of the stock on the day prior to the split.

Split

The act of a publicly-traded company increasing the number of outstanding shares, while maintaining the same market capitalization. In other words, a company engages in a stock split in order to decrease its share price by increasing the number of shares available. Current holders of the stock are given more shares so that they maintain the same percentage of ownership in the company. For example, a company with a share price of $400 may double the number of shares so that the share price drops to $200. Companies conduct stock splits for a number of reasons; one possible reason is to keep its shares affordable. See also: Last Split, Split Ratio, Split Adjusted.

split

A proportionate increase in the number of shares of outstanding stock without a corresponding increase in assets or in funds available, as would be the case in a new stock offering or in an acquisition that uses stock as payment. Essentially, a firm splits its stock to reduce the market price and make the shares attractive to a larger pool of investors, although it is questionable if the firm's stockholders actually benefit from a split because share prices are reduced proportionately with the increase in shares outstanding. A 4-for-1 split would result in an owner of 100 shares receiving 300 additional shares, or an after-split total of 4 shares for every 1 share owned before the split. Also called split up, stock split. Compare reverse stock split.
Case Study In April 1996, directors of the Coca-Cola Company approved a 2-for-1 split, the firm's fourth stock split in a decade. The announcement stated that trading in the split shares would begin on May 13, approximately a month after the split was announced. Shares of the firm's common stock fell by $1.25 with the announcement. Shareholders of Coca-Cola could expect that the stock price would decrease by half when the securities commenced trading on a post-split basis. A stock split results in additional shares of ownership without a corresponding change in total income or assets. All per-share financial statistics decline in proportion to the size of the split. Thus, a 2-for-1 split results in twice the outstanding shares, each with half the book value and half the earnings as prior to the split. In general, stock splits create more paper but not more value for shareholders, because the market value of the stock can be expected to fall in proportion to the size of the split. A stock trading at $60 per share just prior to a 4-for-1 split should trade at approximately $15 per share following the split. Academic research investigating how or when investors can profitably invest in stock split situations offers mixed results. Some research indicates that trading stock just prior to a split may create unusual profit opportunities. One well-known study finds that unusual returns can be earned in the days before and after the announcement, but not on the date of the actual split. Other research indicates investors will earn unusually low returns by investing in stock in the year or two following a split. This variability of results means the individual investors cannot expect to earn unusual profits by purchasing a stock just prior to or following a split. By the time a split occurs, any unusual profit opportunity has already passed.
References in periodicals archive ?
The portion of the split gift to be reported by the spouse who made the gift is listed in column G.
The company split its stock five times during the decade and again in June 2000.
The different stock split results in these two examples echo a warning issued by Outlaw.
In all but one case, plans to split area codes have had to be revised because of public protest, she said.
He is more interested in finding out people's calling patterns and whether the north-south or east-west split will keep people happiest.
More than 1,500 shares: Shareholders holding more than 1,500 shares would receive a total number of post-split shares in accordance with the 1 for 15 reverse split ratio, with fractional shares being rounded up to the nearest whole number.
Caution: If spouses elect to split gifts, they split all gifts.
Shareholders of record who hold stock certificates will receive a letter of transmittal requesting that they surrender their old stock certificates for new stock certificates reflecting the adjusted number of shares as a result of the reverse stock split.
Until surrender, each certificate representing shares before the Reverse Split will continue to be valid and will represent the adjusted number of shares based on the exchange ratio of the Reverse Split, rounded to the nearest whole share.
Any fractional shares resulting from the reverse stock split will be rounded up to the nearest whole share and no cash payment will be made in respect to such rounding.
A total of 5,570,106 votes were voted in favor of the reverse stock split proposal, 41,204 votes against the reverse stock split proposal and 28,165 votes abstained.