Stock Split

A stock split divides one share, whose price has risen high, into several shares. Splitting 1 share into 4 makes the price one-fourth and the share count four times larger. It's like cutting a $10 pizza into 4 slices — the total amount (the company's value) is unchanged.

When the per-share price gets very high, small investors may find even a single share hard to buy. Lowering the per-share price through a split lets more people buy easily, and trading often becomes more active.

A split itself does not change the company's value. Cutting the pizza into smaller slices doesn't create more pizza. The split alone produces no gain.

That said, a company splitting its stock usually means the price has risen a lot, so it is sometimes read as a sign that things have been going well. Improved accessibility can also draw attention in the short term.

When a split lowers the per-share price, access becomes easier for small investors, and trading volume and attention sometimes increase. But this is a sentiment and supply-demand effect only — the company's actual value has not grown.

Conversely, a reverse split, which combines several shares into one, is often done by a company whose share price has fallen very low in order to keep up appearances, so the context differs.