Stock Splits

 

A company splits its stock to adjust one of these:

  • Amount of shares in the market
  • Price of outstanding stock

The company usually gives you more shares of stock for every share you own. These are often referred to as two-for-one or three-for-one stock splits. On rare occasions, a company might have a reverse split and give you fewer shares for each share that you own (Ex: a one-for-two stock split).

If the stock is split two-for-one, you now own two shares for every share you own. The total basis of the stock doesn’t change. Instead, the value of each share changes.

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