A stock split is a corporate action in which a company divides its existing shares into multiple shares to increase the liquidity of the shares. The number of shares outstanding increases by the specific multiple that the company declares. For example, in a 2-for-1 stock split, each existing share is split into two shares.
Stock splits can make shares more accessible to a wider range of investors by lowering the price per share. Historically, they have been perceived positively by the market, sometimes leading to an increase in investor interest and trading activity. They do not fundamentally alter the company’s value; the market capitalization remains the same. Stock splits are different from stock dividends, which also involve distributing additional shares to existing shareholders, but are often viewed as a sign of company strength and future growth prospects.
