Stock Split

A Stock Split is a method of increasing the 'liquidity' of a company's shares by increasing the number of shares in issue but at the same time reducing the value per share. The value of the company remains the same, and so the value of each investors holding remains the same. For example a '2:1 split' of a share valued at £1 would mean that for every existing share an investor owns, they would receive 2 shares of value £0.50 each.

A similar method of reducing the average share price would be by performing a bonus issue in the UK. In either case, the liquidity of a share is only increased because of investor psychology, because the monitory value of an existing investment in the company does not change. The share price just looks 'cheaper'.

It is not to be confused with a rights issue where an existing investor is given the right to purchase new shares in the company which would involve additional investment into the company.

What to do if you need more help

If you need more help with your specific commercial loan, mortgage or insurance requirement please speak to a professional financial adviser.

We hope you found this information useful.

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