Category Archives: reverse stock split

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:

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