Stock Split

A stock split is a corporate action where a company divides its existing shares into a larger number of shares, proportionally reducing the price per share while maintaining the same total market capitalization. In a 2-for-1 split, each share becomes two shares at half the price; in a 4-for-1 split, each share becomes four shares at one-quarter the price. Companies split their stock to make shares more accessible to retail investors (especially before fractional shares became widely available), increase trading liquidity, and bring share prices into a "conventional" range. High-profile splits include Apple's 4-for-1 split in 2020 (reducing shares from ~$500 to ~$125), Amazon's 20-for-1 split in 2022 (from ~$2,800 to ~$140), and Nvidia's 10-for-1 split in 2024. While splits are fundamentally neutral (like cutting a pizza into more slices), stocks have historically shown slight positive abnormal returns around split announcements, likely due to the positive signal about management's confidence in continued growth.