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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
However, UEFA owever, UEF president A president Michel Platini is also keen to give support to Prince Ali and ensure that there is no split vote among associations keen on reform of FIFA FA F.
It would be the first split vote on rates since July 2011.
Earlier this month, the BOK's seven-member monetary policy committee, led by Lee, decided to hold the benchmark rate at 25 percent for a 14th straight month in a split vote.
The regents' intent to commission an external review of the foundation's now-defunct forgivable loan program for some faculty members of the University of Texas at Austin School of Law has been a flashpoint of controversy since it was approved at a tense March 20 meeting on a 4-3 split vote. The program has already been reviewed internally, but the regents opted to set aside the previous report - citing "fact discrepancies" - and start anew with outside investigators.
The Eugene City Council in a split vote last month also endorsed the west Eugene line.
The arguments could end up in the UK Supreme Court - yes, in London - which could take the split vote beyond 2014 and the patently anti-English Bannockburn anniversary.
The committee favored her in a split vote over Maryann Perry, deputy superintendent for Leominster public schools.
-- In a split vote, a Food and Drug Administration advisory panel voted 8-6 that the approved pain indications for duloxetine be expanded to include a broader population of patients with chronic pain.
A split vote last month saw the council forced to rethink the scheme which could affect hundreds of children travelling from Chirk to Dinas Bran High School in Llangollen.
The Bank of Japan decided at a meeting of its Policy Board on Friday to cut its key interest rate for the first time in 7-1/2 years, with the governor, in a rare move, casting the deciding vote after a split vote among its members.
Ms Dunn said her move was an attempt to prevent a split vote at the election on December 6.
The committee, under Mr Hartland's chairmanship, agreed after a split vote to lodge a formal objection to the beach and to the renewal of temporary planning permission for the BBC TV Big Screen at Chamberlain Square.