Stock splits are when a company divides its existing shares into multiple shares. This increases the number of shares outstanding, while reducing the price of each share.
Stock splits are a corporate action taken by a company to divide its existing shares into multiple shares. This is done to reduce the price of each share, making it more affordable for investors to purchase. The number of shares outstanding increases, but the total dollar value of the shares remains the same.
Stock splits are usually done when a company’s stock price has risen to a level that is too high for many investors to afford. By splitting the stock, the company can make it more accessible to a larger number of investors. This can also help to increase the liquidity of the stock, as more investors are able to buy and sell it.
Stock splits can also be used to signal to the market that the company’s stock is undervalued. By splitting the stock, the company is essentially saying that the current price does not reflect the true value of the company. This can lead to an increase in the stock price as investors become more confident in the company’s prospects.
Stock splits can also be used to reward existing shareholders. By splitting the stock, the company is essentially giving existing shareholders more shares at a lower price. This can be beneficial for shareholders, as they can benefit from the increased liquidity and potential increase in the stock price.
Overall, stock splits can be a beneficial corporate action for both the company and its shareholders. By making the stock more accessible to a larger number of investors, the company can increase its liquidity and potentially increase its stock price. At the same time, existing shareholders can benefit from the increased number of shares at a lower price.