How to Interpret a Stock Split

When a company’s existing shares are automatically divided into multiple shares it is known as a stock split. Splits are typically bullish in nature and are commonly used to both identify the health of a company and lower the overall stock price.

Done by management to lower the price per share, stock splits are typically performed when the stock has consistently appreciated over a long duration of time.

While a stock split does affect the stock price, it does not affect the overall value of the position itself. For example, If a stock splits 2 for 1 at $100 a share then each share is split into two separate shares worth $50 individually. Thus, the value remains $100 and is not changed.

Read more about stock splits and hundreds of other terms in the stock terms area of the site (View a full list of all terms).

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