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

Avoid easyJet shares – there are better airlines to invest in
Share tips

Avoid easyJet shares – there are better airlines to invest in

EasyJet used to be one of Europe’s most impressive airlines. But now it is facing challenges on all fronts and losing out to the competition. Rupert …
16 May 2022
Value is starting to emerge in the markets
Investment strategy

Value is starting to emerge in the markets

If you are looking for long-term value in the markets, some is beginning to emerge, says Merryn Somerset Webb. Indeed, you may soon be able to buy tra…
16 May 2022
Britain’s ten most-hated shares – w/e 13 May
Stocks and shares

Britain’s ten most-hated shares – w/e 13 May

Rupert Hargreaves looks at Britain's ten-most hated shares, and what short-sellers are looking right now.
16 May 2022
Is the oil market heading for a supply glut?
Oil

Is the oil market heading for a supply glut?

Many people assume that the high oil price is here to stay – and could well go higher. But we’ve been here before, says Max King. History suggests tha…
16 May 2022

Most Popular

Get set for another debt binge as real interest rates fall
UK Economy

Get set for another debt binge as real interest rates fall

Despite the fuss about rising interest rates, they’re falling in real terms. That will blow up a wild bubble, says Matthew Lynn.
15 May 2022
High inflation will fade – here’s why
Inflation

High inflation will fade – here’s why

Many people expect high inflation to persist for a long time. But that might not be true, says Max King. Inflation may fall faster than expected – and…
13 May 2022
What the Ukraine crisis might mean for ESG investing
Advertisement Feature

What the Ukraine crisis might mean for ESG investing

The Ukraine crisis has brought many of the issues around ESG investing into sharper focus. Where does the sector go from here?
3 May 2022