Poll of the Day > What's it called when a stock is broken up into smaller shares?

(+) Yeah! (+)

Like if a DLZX (stocks usually have werid names like that) turned their existing shares into groups of 15 shares or something.

I feel like this is simple, but I couldn't think of a right way to word it for the googlez

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A stock split.

You have 1 share of XYZ turn into 2 shares. As a result, you have twice as many shares, but each is worth half as much.

Conversely, there is also a reverse stock split, where the number of shares are reduced, but each shares value increases as a result.

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The Popo posted...

A stock split.

You have 1 share of XYZ turn into 2 shares. As a result, you have twice as many shares, but each is worth half as much.

Conversely, there is also a reverse stock split, where the number of shares are reduced, but each shares value increases as a result.

So what are the reasons for the split if it adds up?

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zebatov posted...

So what are the reasons for the split if it adds up?

Stocks are split for many reasons, one of the most common is the price of the stock might be too high. Let's say it costs $200 for a share of the company stock a split makes it more appealing at shares costing $100 each.

As an example of what happens when stock splits never occur, do a quick google search for brk.a, which is the symbol for Berkshire Hathaway a-shares. Youll see the price of each share.

Also, reverse splits occur to make a stock seem more prestigious if it has fallen in price by a good amount, or even to keep a stock from falling off of exchanges that have minimum pricing rules.

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no wonder I couldn't find info on google

I was all like "what's a stock split called?"

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Monopoman posted...

Stocks are split for many reasons, one of the most common is the price of the stock might be too high. Let's say it costs $200 for a share of the company stock a split makes it more appealing at shares costing $100 each.

@Monopoman
What are the pros and cons to this approach? Wouldnt that upset current shareholders?

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zebatov posted...

@Monopoman
What are the pros and cons to this approach? Wouldnt that upset current shareholders?

Why would it upset share holders? if you had 100 shares of the company at $200 each you now have 200 shares of the company at $100 each.

Not to mention most splits are showing the company is making money very well and need to split the stock because of it. Like I said it makes investors more likely to buy in if a stock is a lower price, if one share of Microsoft went for $1500 it would be a very expensive company to invest in because most people want to buy 1000+ shares of a stock not just a couple.