Stock Split

When a company divides its existing shares into multiple shares to lower the per-share price.

What Is a Stock Split?

A stock split divides each existing share into multiple shares, reducing the price per share proportionally while keeping the total market value unchanged. In a 4-for-1 split, each $400 share becomes four $100 shares.

Why Companies Split

Companies split their stock to make it more accessible to retail investors and improve trading liquidity. A $3,000 stock might deter small investors, but after a 20-for-1 split, the $150 price is much more approachable. Major tech companies like Apple, Amazon, and Google have all done significant splits.

Does a Split Change Value?

Theoretically, a split changes nothing fundamental — it's like cutting a pizza into 8 slices instead of 4. You have the same amount of pizza. However, research shows stocks often rally after split announcements, likely due to increased accessibility and the signal that management is confident about the stock price.

Impact on EPS

After a split, EPS and all per-share metrics are adjusted accordingly. A company earning $10 EPS pre-split would show $2.50 EPS after a 4-for-1 split. Historical data is also retroactively adjusted so comparisons remain apples-to-apples.