What Does "Stock Split" Mean?


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Vikash Swaroop Profile
Vikash Swaroop answered
The term 'Stock Split' refers to the financial aspect of a company and it means an action that is performed to increase the shares of a public company. The price of each share is adjusted in such a way that the market capitalisation of the company remains at the same value as before the dilution of the shares. The term can be better explained with the example given below; if a company has 200 shares, each of the value of £100, the market capitalisation of the company stands at £20,000. If the company does the stock split, the cumulative value of its shares in the market should as before on £20,000. So the company can divide it into 2 shares for 1, and the value of each share should be reduced by 50%, that means the new value of each share is £50.

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