Understanding Stock Splits

Every now and again, companies will execute what is call a stock split or even a reverse stock split. It seems to create chatter amongst investors when a stock split is announced by the board of directors but the reality is that a stock split doesn’t change anything to the underlying company value. The company is worth exactly the same.
For example, take Company X which operates in the drink business and have a stock price of $100 and they have 1 million outstanding shares for a total value of $100 million. In any of the scenarios below, the value will stay the same:

About EdR

Tant que les lions n’auront pas leurs propres historiens, les histoires de chasse continueront de glorifier le chasseur. (proverbe africain)

Posted on August 7, 2013, in reverse stock split, stock split, The Passive Income Earner. Bookmark the permalink. Leave a comment.

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