Calculate the Impact of Stock Splits on Your Investments.
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A stock split is a corporate action where a company increases the number of its outstanding shares while decreasing the share price proportionately. The overall market capitalization of the company remains the same, but shareholders end up with more shares at a lower price. Stock splits are often executed to make shares more affordable and attractive to investors.
During a stock split, the company decides on a ratio, such as 2:1 or 3:2, which determines how many new shares a shareholder will receive for each existing share. For example, in a 2:1 split, each shareholder would receive two shares for every one share they own. While the number of shares doubles, the share price halves, keeping the overall investment value unchanged.
To calculate the new stock price and number of shares after a split, use the following formulas:
New Price = Current Price × (Old Shares Ratio / New Shares Ratio)
New Shares = Existing Shares × (New Shares Ratio / Old Shares Ratio)
For example, in a 3:2 stock split where the current price is $150 and you own 200 shares:
$150 × (2 / 3) = $100
200 × (3 / 2) = 300 shares
Stock splits can offer several benefits:
There are two main types of stock splits:
Use our Stock Split Calculator to quickly determine the impact of a stock split on your holdings. Simply enter the current stock price, the stock split ratio, and the number of shares you own to see the new stock price, the additional shares you'll receive, and the total value of your investment after the split.
Companies often perform stock splits for several reasons:
Some of the most famous stock splits in history include:
Does a stock split affect the value of my investment?
No, a stock split does not change the overall value of your investment. You will have more shares, but the share price will decrease proportionately.
Do I need to do anything when a stock I own splits?
No, the split is automatically reflected in your brokerage account.
Can stock splits affect stock prices in the long run?
While stock splits do not directly affect the value, they can lead to increased demand and trading activity, which may influence the stock price over time.
Stock splits are a valuable tool for companies looking to make their shares more accessible and attractive to a broader audience. Understanding the mechanics and implications of stock splits can help you make more informed investment decisions. Use our Stock Split Calculator to see how a split could impact your holdings.