An increase in the number of issued and outstanding shares of stock which decreases the share price proportionately. Stock splits are most commonly used by public companies, particularly when their stock price has risen substantially and they want to attract a broader group of investors (under the theory that decreasing the high per share price makes the stock more attractive to investors, including small retail investors) and increase liquidity for the company's shares.
After a stock split, a current stockholder holds more shares, but each share is proportionately worth less. As a result, stock splits do not change the aggregate value of what the stockholder owns or the overall market capitalization of the company. For example, if a company's stock is trading at $100 per share and the company declares a ten-for-one stock split, every outstanding share held by a stockholder becomes ten shares with a value of $10 per share.
For information on how to effect a stock split by issuing dividends, see Stock Split Checklist.
