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|What should I do when my stock splits?
By The-Adviser.com -
|New York -
Companies generally split stock when the stock has reached a price that individual
investors are often reluctant to buy a full lot or 100 shares because it costs so much.
Corporations generally split their stocks to lower the price and stimulate trading.
When a stock is split, there are more shares available but the total market value of the company stays the same. For instance, after a stock splits, if you owned 100 shares of stock at $50 per share you would own 200 shares at $25 per share. In effect, a stock split is no different than getting four quarters for a dollar bill. When your stock splits, you should do the following:
Many academicians believe that there is no fundamental difference between a pre and post split stocks. The reasoning is that the total market value of the company is the same. We believe that stock prices generally rise after a stock splits simply because new investors are attracted to it and are able to make round lot purchases.
Regardless, of what academicians write and say, we believe that stocks generally rise after a stock split.
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