What is a Stock Split?

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About Stock Split:

A stock split happens when a company increases the number of its shares to boost the stock’s liquidity.
It is a corporate action in which a company issues additional shares to shareholders, increasing the total by the specified ratio based on the shares they held previously.
Although the number of shares outstanding increases, there is no change to the company’s total market capitalization as the price of each share will split as well.
The most common split ratios are 2-for-1 or 3-for-1 (sometimes denoted as 2:1 or 3:1). This means that for every share held before the split, each stockholder will have two or three shares, respectively, after the split.
The number of shares increases, but the price per share goes down in proportion.
Why is a stock split done?
- It is done to infuse liquidity and to make shares affordable for various investors who could not buy the shares of that company before due to high prices.
- It is sometimes aimed at helping a company meet the minimum requirements to remain listed on an exchange. This is because some stock indexes are price-weighted, meaning a company wishing to join the index would need to have, among other criteria, a price that falls within a certain band.
What is a Reverse Stock Split?
- It is the opposite transaction, in which a company lowers, instead of increasing, the number of shares outstanding, raising the share price accordingly.
- The total value of your shares would remain consistent.

Q1) What is Market Capitalization?

Market cap—or market capitalization—refers to the total value of all a company’s shares of stock. It is calculated by multiplying the price of a stock by its total number of outstanding shares.

Source: Sigachi Industries announces 10:1 stock split, shares begin trading ex-split