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Stock Split
Stock split refers to a company action that increases the number of outstanding shares, by lowering their price. If a company have 1000 shares with a price of $5, and split its stock “2 for 1”, then there will be 2/1*1000 = 2000 shares with the price of ½*5= $2.5. Common ratios are 2-for-1, 3-for-2, and 3-for-1.
Stock split usually brings price increase, but research does not prove this. If an investor thinks that stock split will increase price, then many people will buy it so the price tends to increase. Company usually do stock split to give signal that the company has good prospect in the future. They can also think that the price is too high for small investor, so they do the stock split. By making it affordable for small investor, its liquidation will increase.



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