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 ?
Panel A of Table 1 shows that reverse splits are an increasing phenomenon.
Benet (1990) in support of Copeland (1979) conclude that "managers seem to engineer splits to return their company' stock price to a particular level that is remarkably stable over time".
Al khaliji, Dlala Holding and Qatar Oman Investment will implement stock split on June 10; QIIB and Alijarah Holding (June 11); QNB, Ahlibank Qatar and Islamic Holding (June 12); Qatar Islamic Bank and Doha Bank (June 13) and Masraf Al Rayan (June 16).
Therefore, the market is both positive and negative about the stock split, asking questions such as: Will its plan push other expensive stocks such as LG Household and Health Care and Lotte Chilsung Beverage to do the same?
* Split NSF by Year split NSF file and generates separate NSF files for all the mentioned years.
On the other hand, Astral Poly rose 45 perc ent after the announcement of the split in April as the company's fundamentals were strong but its stock had low liquidity." EXPLAINING STOCK SPLIT Stock split involves division of equity shares by lowering their face value.
Hence, stock split makes the stock more liquid and affordable (one can make small investments in it).
This reverse stock split will affect all shares of the company's common stock outstanding immediately prior to the effective time of the reverse stock split, as well as the number of shares of common stock available for issuance under the company's equity incentive plans.
Dolly (1933) surveyed managers of eighty-eight companies issuing stock splits; the finding of the survey was that the main motive for issuing stock splits is to widen the distribution base among the shareholders.
The recent paucity of stock splits has resulted in stock prices appearing to be much higher than they might otherwise be.
The pile of wood to be split begins to grow on the far side from the truckload pile.