Stock Splits

Ordinary splits occur when a publicly held company distributes more stock to holders of existing stock. A stock split, say 2-for-1, is when a company simply issues one additional share for every one outstanding. After the split, there will be two shares for every one pre-split share. (So it is called a "2-for-1 split.") If the stock was at $50 per share, after the split, each share is worth $25, because the company's net assets didn't increase, only the number of outstanding shares.

Sometimes an ordinary split is referred in terms of percentage. A 2:1 split is a 100% stock split can also be called 100% stock dividend or 100% stock split. (A 50% split would be a 3:2 split or 50% stock dividend). Each stockholder will get 1 more share of stock for every 2 shares owned.

Reverse splits occur when a company wants to raise the price of their stock, so it no longer looks like a "penny stock" but looks more like a self-respecting stock. Or they might want to conduct a massive reverse split to eliminate small holders. If a $1 stock is split 1:10 the new shares will be worth $10. Holders will have to trade in their 10 Old Shares to receive 1 New Share.