How do they work? Why is it generally good that a company does a stock split? If a pending split is announced, why does every start buying instead of waiting?
Let’s say there’s a company with shares at $100 and they do a 4 to 1 split, and I happen to own 10 shares. ($1000 value)
Do my shares multiply by 4? Does the value stay the same per share? Or the same for my total share? IE: I now have 40 shares, but their value dropped to $25 each, meaning I still have $1000 worth.
In: 1
Back in the day, a company had sold ten million shares, of which you bought ten. So you own one millionth of the company.
The company’s been doing well and is now valued at $1 billion. The company’s board thinks $100 per share looks a little pricey, and they might get more interest if that were smaller. (Also, they’re reasonably sure the company’s value won’t be going *down* anytime soon.) So they decide to issue four shares for every one that’s out there.
Post split, you own 40 shares, which is still one millionth of the company. At $25 per, your shares are still worth $1000.
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