Split happens when a stock’s face value is reduced by a certain proportion. Stock split is a corporate action when the company increases the number of its shares as a result of bringing down the face value of its shares. The price of shares comes down as a result of ‘stock split’. The number of shares increases, but the total value of an investor’s investment remains the same. Split shares increase liquidity and are more ‘affordable’ for investors who generally stay away from higher priced shares.
Some advantages of Split Shares to shareholders are:
a) Increased liquidity – Split shares are more accessible to retail investors which results in greater demand, increased trading and thus increased liquidity.
b) Increased accessibility – for new investors, split shares present an opportunity to participate in the growth of such companies
Some advantages of Split Shares to companies are:
1. Greater participation by retail investors
2. Increased affordability also signifies more trading volumes
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