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Stock Split Formula:
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Stock split price refers to the adjusted price per share after a company divides its existing shares into multiple shares. This corporate action increases the number of shares while proportionally decreasing the price per share, maintaining the same overall market capitalization.
The calculator uses the stock split formula:
Where:
Explanation: The formula calculates the new price per share by dividing the old price by the split ratio. For example, a $100 stock with a 2:1 split would result in a new price of $50 per share.
Details: Calculating the post-split price is essential for investors to understand their position value, track performance accurately, and make informed investment decisions following corporate actions.
Tips: Enter the pre-split price in currency units and the split ratio as a unitless number. Both values must be positive numbers greater than zero.
Q1: What is a typical stock split ratio?
A: Common split ratios include 2:1, 3:1, and 3:2, though companies can choose any ratio. A 2:1 split means each share becomes two shares at half the price.
Q2: Does a stock split change the company's market capitalization?
A: No, a stock split does not change the company's market capitalization. It only increases the number of shares outstanding while proportionally decreasing the share price.
Q3: How does a stock split affect my investment value?
A: Your total investment value remains the same immediately after a split. You own more shares, but each share is worth proportionally less.
Q4: Are there reverse stock splits?
A: Yes, reverse splits reduce the number of shares and increase the price per share. For example, a 1:10 reverse split would convert 10 shares into 1 share at 10 times the price.
Q5: Why do companies perform stock splits?
A: Companies split stocks to make shares more affordable to small investors, increase liquidity, and potentially make the stock more attractive to a broader range of investors.