A stock split is a type of corporate action that changes the company's existing shares. In a stock split, the number of shares are increased by a specific multiple, but the share price decreases by the same multiple. For example, a 7-for-1 stock split means the number of shares you own would increase by 7 times, but the price of the share would decrease by 7 times. It is what is referred to as a zero-sum-game, as you will be in the same position after the split than you were before it happened. For example, let's say you own 100 shares of BAC at a price of $10.00. That means the value of your holding is $1,000. If BAC has a 5-for-1 stock split, it will mean that your BAC shares will increase to 500 and the share price will decline to $2.00, but your overall value of your position stays the same at $1,000 (500 shares x $2).
Written by ReginaUpdated over a week ago