- 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 within a week.
- Stock split is done to infuse liquidity by which various investors will now be able to buy the shares who could not buy them before due to high prices.
- The most common split ratios are 2-for-1 or 3-for-1 (sometimes denoted as 2:1 or 3:1). This means for every share held before the split, each stockholder will have two or three shares, respectively, after the split.
For example:
- If B owns 100 shares of a company of face value ₹ 50,
- then after a stock split of the ratio 2:1
- B will now have 200 shares with reduced face value of ₹ 25 ,which won’t affect the total face value of the holdings .