How does a stock split work?

How does a stock split work?

The company chooses to split its shares in order to decrease their trading price of the stock. It's a corporate action in which the company divides its existing shares into multiple shares.

This decision is made by the board of directors of the company and they also decide on how to split the shares i.e. a stock split may be of 2:1, 3:1, or 10:1 etc.

For example: In a 3:1 stock split, means each share held by the investor, there will now be three. In simple words, the number of outstanding shares of the company in the market will triple. On the contrary, the price of each share will be reduced by dividing the price by 3. In this way, the company’s overall value remains the same.

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