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Finance Glossary

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Stock Split


See stock dividend. They are identical in result.

Basically, it's what happens when a company takes its shares outstanding and doubles them. So if you hold 100 shares, after the split, you'll hold 200 shares. That might seem exciting, but it does nothing—for you. If you owned $100 of shares before the split, you will own $100 of shares after; just the number of individual shares will be bigger.

The company might get some benefit from a split because the price per share will be smaller, which can encourage more investors to buy.


You own 100 shares of BananaSplit and each share is worth $10 (for a grand total of $1,000). Then they split their stock. You now have 200 shares of BananaSplit all worth $1,000 or $5 per share. Not much has changed. But if you were a new investor and wanted to invest in the stock, you'd only have to pay $500 to buy 100 shares. That might be more realistic for you if you're on a budget.