Stock Split

A stock split is when a company divides its existing shares into a larger number of shares. In a 2-for-1 split, every share you own becomes two shares, each worth half the original price. If you held 10 shares at $200, you’d now hold 20 shares at $100. Your total investment is still worth $2,000.

Nothing about the company’s value changes. It’s like exchanging a $20 bill for two $10 bills.

Why it matters

Companies usually split their stock when the share price has gotten high enough that it might feel out of reach for some investors. Apple, Google, and Amazon have all done it. A stock trading at $3,000 per share can feel intimidating even though many brokerages now let you buy fractional shares.

There’s also a reverse stock split, where a company combines shares to make the price higher. If you own 100 shares at $1, a 1-for-10 reverse split leaves you with 10 shares at $10. Companies sometimes do this to avoid being delisted from an exchange (most exchanges have minimum price requirements).

For you as an investor, a stock split doesn’t change your wealth or the fundamentals of the company. Your percentage ownership stays the same, and the company’s market capitalization stays the same. The only thing that changes is the number of shares and the price per share.

If a company you own announces a split, there’s no action you need to take. Your brokerage will handle it automatically. The new shares and adjusted price will just show up in your account.

A concrete example

Say you own 50 shares of Shopify at $120 each, worth $6,000 total. Shopify announces a 4-for-1 stock split. After the split, you’d own 200 shares at $30 each. Your total investment is still $6,000. The price per share looks different, but your ownership in the company hasn’t changed at all.