Stock split

In plain words

Cut a pizza into 8 slices instead of 4 and you have more slices, each half the size, but exactly the same pizza. A stock split does that to a company: in a 2-for-1 split, every share becomes two, each worth half as much.

If you owned 10 shares at $200 ($2,000), after a 2-for-1 split you own 20 shares at about $100: still $2,000. The company’s market value, its profits and your share of them are unchanged.

Companies split when their share price has risen a lot, to make a single share cheaper to buy. A reverse split does the opposite (10 shares become 1), usually to lift a very low price above an exchange’s minimum.

Example

One level deeper

Why split if nothing changes? Partly psychology: a $50 share feels more affordable than a $1,500 one, and many companies like their price in a familiar range. Partly mechanics: options trade in lots of 100 shares, and a price-weighted index such as the Dow would give a very high-priced share too much weight.

Many brokers now sell fractions of a share, which has made the price of one share matter less for small investors. Studies have found that prices tend to rise a little after a split is announced, perhaps because a split signals confidence, but the effect is small and debated.

In the filings of today’s S&P 500 companies we found 142 splits since 2010. The most recent was Amphenol’s 2-for-1, in 2026.

Why it matters

It explains sudden “drops” in old price charts that were not real losses: charts and per-share figures must be adjusted for splits.

It shows that the price of one share says nothing about how big or how expensive a company is; only market value and ratios like the P/E do.

Reverse splits are often a warning sign: companies use them when their share price has fallen very low.

A common mistake