Too embarrassed to ask: what is a stock split?

Discover what a "stock split" is, and how it expects the share price in this week's “too embarrassed to ask”.

A “stock split”, or “share split”, is when a company decides to increase the number of shares it has in issue by giving its current investors extra shares for each existing share that they already own. Extra shares!

That sounds great! But of course, shareholders aren’t really getting anything extra. Each investor still holds the same percentage of the company as they did before the split. It’s just that it’s divided into more individual shares.

As a result, the company’s share price will fall to reflect the larger number of shares in issue. For example, say a company had 10,000 shares in issue, at a share price of £1 per share. It carries out a two for one split, so that each investor ends up with two shares for every one they originally owned.

Recommended

Expect more turbulence as the market calls central bankers’ bluff
Stockmarkets

Expect more turbulence as the market calls central bankers’ bluff

With bond yields climbing and stockmarkets sliding, markets are hoping central bankers will step in again to repress interest rates – but that won’t …
26 Feb 2021
The MoneyWeek Podcast: strategic metals, the commodities supercycle and the electrified future
Commodities

The MoneyWeek Podcast: strategic metals, the commodities supercycle and the electrified future

John Stepek talks to Dr Paul Jourdan, CEO of Amati Global Investors, about investing in the metals needed for the post-oil electrified world, the impo…
26 Feb 2021
Our trade of the decade came good – what’s next?
Investment strategy

Our trade of the decade came good – what’s next?

Back in 2010 we said you should invest in unloved and undervalued Japanese stocks. If you had done that, you’d have made a nice return. So what should…
25 Feb 2021
Great frauds in history: Helmut Kiener, Germany’s mini-Madoff
People

Great frauds in history: Helmut Kiener, Germany’s mini-Madoff

The performance of Helmut Kiener’s fund of funds, which invested money from institutions and private investors into hedge funds, seemed too good to be…
25 Feb 2021

Most Popular

The days when you could get 7% from your bank are long gone – so what do you do?
Bitcoin

The days when you could get 7% from your bank are long gone – so what do you do?

With interest rates at rock bottom for so long, we’ve been forced to move from saving to speculating to earn any sort of return. Dominic Frisby asks w…
24 Feb 2021
Why you should still put money into a cash Isa
Cash ISAs

Why you should still put money into a cash Isa

Interest rates may be lousy, but tax-free saving into a cash Isa is still a good idea.
23 Feb 2021
Are we heading for another bond market tantrum?
Government bonds

Are we heading for another bond market tantrum?

The last time the US central bank tried tightening the purse strings, the bond markets threw a tantrum. With yields now rising, could we be about to s…
25 Feb 2021