What is a stock split?
A stock split is a corporate action where a company increases the number of shares by reducing the face value of the stock. Companies generally split shares to increase liquidity since the price of the stock reduces after the split. A split increases the number of shares by decreasing the face value, but the total value of the investment remains the same. The split shares will be credited in 2 days.
Example scenario
When a stock with a face value of ₹10 undergoes a 2:1 stock split, the face value of the stock reduces from ₹10 to ₹5. This results in doubling the number of shares owned, but the total investment value remains constant at ₹10. Although the value per share decreases after the split, the total investment value remains the same.
Here are some more scenarios:
| Split Ratio | Old FV | No. of shares owned before split | Share price before split | Investment value before split | New FV after the split | No. of shares you own after the split | Share price after the split | Investment value after the split |
| 2:1 | 10 | 100 | 900 | 90,000 | 5 | 200 | 450 | 90,000 |
| 5:1 | 10 | 100 | 900 | 90,000 | 2 | 500 | 180 | 90,000 |
To learn more about stock split and other corporate actions, visit zerodha.com/varsity/chapter/five-corporate-actions-and-its-impact-on-stock-prices.
All the current and upcoming corporate actions can be tracked on this list (DOC).
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