What does a 'split' mean when it comes to a stock?

Question

What does a 'split' mean when it comes to a stock?

Answer 1

A stock split or stock divide increases the number of shares in a public company. The price is adjusted such that the before and after market capitalization of the company remains the same and dilution does not occur. Options and warrants are included.

Take, for example, a company with 100 shares of stock priced at $50 per share. The market capitalization is 100 × $50, or $5000. The company splits its stock 2-for-1. There are now 200 shares of stock and each shareholder holds twice as many shares. The price of each share is adjusted to $25. The market capitalization is 200 × $25 = $5000, the same as before the split.

Answer 2

There are 3 main kinds of splits.

Stock Splits:

"When a company declares a stock split, the price of the stock will decrease, but the number of shares will increase proportionately.

For example, if you own 100 shares of a company that trades at $100 a share and it declares a two for one stock split, you will own a total of 200 shares at $50 a share after the split.

A stock split has no effect on the value of what shareholders own. If the company pays a dividend, your dividends paid per share will also fall proportionately."

http://www.sec.gov/answers/stocksplit.ht...

A 2nd kind of  split can occur when a (for example) $90 stock goes to (say) $45 due to bad real estate loans. This is called an involuntary split and is determined by market forces (market humor).

A 3rd kind of split is when one leaves a relationship situation. This happens about 50% of the time in marriages (relationship humor).

I'll leave out the food split that involves bananas, nuts and ice cream, but I hear this one is the most favored kind of split.