Share Split

Share Split

Definition

A corporate action in which a company's existing shares are divided into multiple shares. Although the number of shares outstanding increases by a specific multiple, the total dollar value of the shares remains the same compared to pre-split amounts, because no real value has been added as a result of the split.

Share split

Share split is the process of splitting shares with high face value into shares of a lower face value.

^v   Alteration of shares

^v   Increase the number of outstanding shares

^v   Approval from board of directors

Reasons of share splits

^v   The price of their stock exceeds the amount smaller investors would be willing to pay. it is aimed at making the stock more affordable and liquid from retail investors point of view

^v   There are more buyers and sellers of shares trading Rs 100 than say Rs 400 as retail shareholders may find low price stocks to be better bargains.

Significance of share splits

^v   To improve the market liquidity

^v   To make an investor attention with other high quality securities

^v   Stock split means of converting odd lot holders into round lot holders

^v   Round lot holder plays a very important role in a stocks marketability and liquidity on

The exchange