A stock split is when a company increases or decreases the number of its shares without changing its total market value. Think of it like cutting a pizza into more slices—there are more pieces, but the pizza is still the same size.

For example, in a 2-for-1 split, each shareholder gets two shares for every one they own. If you had 10 shares, you’d now have 20, but each would be worth half as much. The overall value of your investment stays the same.

Stock splits don’t change how much a company is worth—they simply change how many shares exist and how much each one costs.

A forward stock split increases the number of shares you own. It’s the most common type of stock split.

Example:

In a 3-for-1 forward split, you get three shares for every one you already have. So, if you owned 10 shares, you’d now have 30. But each share would be worth one-third of its original price.

Your total investment value stays the same—the only thing that changes is the number of shares and the price per share.

Forward splits are often used to make expensive stocks more affordable for everyday investors.

A reverse stock split reduces the number of shares you own while increasing the price per share.

Example:

In a 1-for-3 reverse split, every three shares are combined into one. So, if you had 30 shares, you’d now have 10. Each share would be worth three times as much, keeping the total value of your investment the same.

Reverse splits are often used by companies with falling stock prices. The goal is usually to raise the share price—sometimes to meet stock exchange requirements or improve the company’s image.

A stock split ratio tells you how many new shares you’ll get—or how many shares will be combined—during a split.

The ratio helps investors understand how their share count and price will change, even though their total investment value stays the same.

Companies split their stock to make shares more affordable and appealing—especially for smaller investors.

A high stock price can discourage people from buying. By splitting the stock, a company lowers the price per share without changing its total value. This can attract more buyers and increase trading activity.

Stock splits may also signal that a company is doing well and expects continued growth. That confidence can build more interest and even push the stock price higher—though that isn’t guaranteed.

For companies with very high share prices, splits can also make stock options and employee compensation easier to manage.

There are three key dates to watch during a stock split:

While the process may sound complex, it’s automatic for investors. You don’t have to do anything to receive the new shares.

Here are a few real-world stock splits from recent years:

These splits made shares more affordable to investors and, in some cases, helped boost demand.

Stock splits don’t change a company’s value—they simply adjust the number of shares and their price. Whether it’s a forward or reverse split, the total worth of your investment stays the same.

However, splits can influence investor behavior. Forward splits often attract more buyers by lowering the share price, while reverse splits may help struggling companies improve their image.

Understanding how stock splits work can help you make smarter decisions and avoid confusion when your share count or price suddenly changes. Remember, a split doesn’t make a stock better or worse—it just changes how it’s divided.