Understanding companies
A stock split changes the number of shares and the price per share in inverse proportions. By itself it does not change the company's equity value or an owner's percentage interest.
Make it click
A cake divided into eight pieces instead of four has smaller pieces but the same total cake. Anyone holding one old piece receives the matching number of new pieces.
Now put that into markets
In a forward split, each old share becomes several lower-priced shares. A reverse split combines shares into fewer higher-priced units.
Exchanges and data providers adjust price histories, per-share figures, options and orders under stated rules. Total market capitalisation changes only with market valuation, not arithmetic alone.
Use split-adjusted series for comparisons and distinguish the effective date from announcement. Check fractional-share treatment and associated corporate actions.
A lower post-split price does not make the company cheaper by valuation. Market reactions can occur, but they are separate from the mechanical split.
Takeaway
