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LSDefine
Simple English definitions for legal terms
share split
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A quick definition of share split:
A share split, also known as a stock split, is when a company issues two or more new shares in exchange for each old share without changing the proportional ownership interests of each shareholder. For example, a 3-for-1 split would give an owner of 100 shares a total of 300 shares, or 3 shares for each share previously owned. This makes the stock more affordable and attractive to potential investors. A reverse stock split is the opposite, where a company reduces the number of shares by calling in all outstanding shares and reissuing fewer shares with greater value.
A more thorough explanation:
A share split, also known as a stock split, is when a company issues two or more new shares in exchange for each old share without changing the proportional ownership interests of each shareholder. For example, if a company does a 3-for-1 split, an owner of 100 shares would receive a total of 300 shares, or 3 shares for each share previously owned.
A stock split lowers the price per share, making the stock more attractive to potential investors. This can help increase liquidity and trading volume in the stock market.
For example, if a company's stock is trading at $100 per share and they do a 2-for-1 split, the new price per share would be $50. This lower price may attract more investors who were previously unable or unwilling to invest at the higher price.