Stock Split

Stock split is when a company splits its stock in order to boost its liquidity

Update: 2023-05-14 11:52 GMT

Stock split is when a company splits its stock in order to boost its liquidity. The number of outstanding shares increased by dividing the existing shares originally issued to the present shareholders. A stock split doesn’t really do much in the way of making a difference to your equity. Though there is an increase in the number of shares after split, the overall market capitalization of the company and the value of each shareholder’s stake remain the same.

If you are not a shareholder of the company that went for a stock split, you have an opportunity to buy the shares now at a lower price than before.

As mentioned above, the stock split happens in a specified ratio. For example, if the ratio is 1:5, it means that for every one share held the shareholder will get 5 shares respectively. If a company had 10 million shares outstanding before the split, it will have 50 million shares outstanding after a 5-for-1 split.

Stock’s price is also affected by a stock split, and the stock price will fall. Stock split results in renewed investor interest, thus having a positive effect on the stock.

For example, the board of directors of  Artemis Electricals and Projects Limited has fixed record date for stock split on 31st March 2023. The small-cap company board has already declared stock subdivision in 1:10 ratio means one stock of the company will be divided in 10 fresh paid-up capitals of the BSE listed company. To make these company announcements official, the BSE has issued notification in this regard confirming company's stock subdivision in 1:10 ratio.

BSE notice said, "Trading Members of the Exchange are hereby informed that Artemis Electricals and Projects Limited., has fixed Record Date for the purpose of Sub-Division of the Equity Shares of the company." The BSE notice went on to add that stock subdivision of the existing equity shares will be done from one equity share of ₹10/- each into ten equity shares of Re. 1/- each." The notice went on to add that record date for stock subdivision has been fixed on 31st March 2023.

A reverse stock split is the opposite of a normal stock split. A stock split will not affect taxes. It is a decision by the company’s board of directors.

A reverse stock split happens when a company reduces the number of shares outstanding and increases the market price of each share. If a company declares a one for five reverse stock split, every five shares that you own will be converted into a single share. If you owned 5,000 shares of the company before the reverse stock split, you will own a total of 500 shares after the reverse stock split.



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