Stock Split occurs when a company decides to issue new stock and to decide which stockholders to sell them. It is decided by Board of Directors of this company.
The most common times that the common stock split is 1: 1 oh when this happens, the shareholders who have shares with them will now be more, but their value is halfway. The total value of your stock does not change. For example, if you have 100 shares before Stock Split and the price is RS 500. Per share, so after stock split you get RS 250 shares will be 200 shares per share.
Stock splits can be different, such as 1: 2, 1: 3, 2: 3, 1: 5.
Companies split their stocks when they feel that the price of the stock has increased that it will no longer be considered as cheap by many investors. Since most stock transactions are in a round lot (many 100 shares), the total cost of 100 shares may be out of reach for some investors. Price of stock rs According to 1000 per share, for example, that many investors are considered to be very expensive if the price per share decreases it would be more economical to buy more.
What is the effect on stock price of stock split?
When a company divides the stock it sends a message that the company has been profitable and it will be beneficial even further, meaning that the company is profitable.
In theory the stock division should not have any effect on the value of the stock, it should be a neutral event. The only thing that has changed is the share price and the number of shares. When you do the math, you have only one value and the same percentage of ownership in the company. In practice, however, companies that divide their shares often declare split or actually see price increases after dividing. The company knows this and is eager to see the increase in stock price.
Reverse split : Sometimes a company will issue a reverse split. When this happens, the shareholder will have less shares at a higher price. For example, a specific reverse partition is 1 for 1 partition. For example, if a company is trading on rs 1 shares and you have 100 shares, after 1 for 10 split, you will have 10 shares on rs 10 shares. A company can perform a reverse division, when the price of their stock has come down to a very low level and they want to increase the share price to look more respectable for potential investors. In addition, some exchanges will not list a stock when the price will fall below a certain level for 30 days.
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