What is a stock split?

What is a stock split?

A stock split is a corporate action in which a company divides its existing shares into multiple shares.

Basically, companies choose to split their shares so they can lower the trading price of their stock to a range deemed comfortable by most investors and increase the liquidity of the shares.

The most common split ratios are 2-for-1 or 3-for-1 (sometimes denoted as 2:1 or 3:1), which means that the stockholder will have two or three shares after the split takes place, respectively, for every share held prior to the split.

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