Stock market basics · updated October 21, 2026
What is a stock split and what does it mean for you
A stock split turns each share into several cheaper shares: in a 3-for-1 split, one $600 share becomes three $200 shares. The total value of your shares, and of the company, does not change.
How it works
The company decides the ratio, for example 2-for-1 or 10-for-1. On the split date, your number of shares is multiplied by the ratio and the price is divided by it. Companies do this so the stock is easier to buy in small amounts. The opposite, a reverse split (or consolidation), merges several shares into one more expensive share.
Worked example
You own one share worth $600. The company does a 3-for-1 split.
Dividends per share, earnings per share and past prices are also divided by 3, so they can still be compared.
Worth knowing
A split does not make the company worth more. Sometimes the price rises after the announcement because investors read it as a sign of confidence, but that effect is not guaranteed.
When a stock split can fool you
The reverse split: when a company merges its shares, the price has usually fallen a lot; it is often a sign of trouble. Old charts have to be adjusted, or they look like a crash.
Related terms
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Questions about a stock split
Do you make money from a split?
Not directly. You have more shares, but each one is worth proportionally less, so the total stays the same.
What is a reverse split?
The opposite: for example, 10 shares of $1 become one share of $10. It is usually done by companies whose price has fallen a lot.
These explanations are for information only. They are not a recommendation to buy or sell.
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