Stock split

A change in the unit, not in the company. In a split each existing share becomes a stated number of new shares and the price is divided by that same number, so the total market value, the proportion of the company each holder owns and the aggregate of everything else stay where they were. A reverse split does the opposite, consolidating shares into fewer and raising the price of one of them, and is commonly used to move a price back above an exchange's minimum listing level.

The dates matter more than the mechanics. An announcement names a record date and an effective date, and from the effective date the price series is adjusted backwards by the factor so that a chart remains continuous rather than showing a fall that never happened. Derivative contracts on the share are adjusted by the counterparty on the same basis, size multiplied and price divided, so the exposure before and after is equivalent. Resting orders are the practical hazard, because a level entered before the split refers to a price that no longer exists, and providers commonly adjust or cancel them.

Two things are read into a split that the arithmetic does not contain. It is not value creation, since nothing about the business changed. And while there is a long literature testing whether splits are followed by unusual returns, on the reasoning that management signals confidence by splitting, the findings are contested, weaker after costs, and weaker again in recent decades as fractional dealing has made a high share price less of an obstacle than it once was.