Monday, June 24, 2013 4:27:13 PM
Best Answer - Chosen by Voters
Assuming you are talking about a "forward" stock split and not a "reverse/forward" stock split as a previous answerer assumed, a forward stock split is when a company simply divides the number of shares it has into a greater number. The goal is often three-fold (i) increase liquidity, (ii) keep the stock in a certain dollar price range and (iii) send a signal to the markets that the company believes the stock will go up. A few companies do it so that their holders will have a few odd-lot shares to sell off in lieu of a dividend.
An example: if you own 100 shares and a company does a 2 for 1 forward split, you will receive 100 shares in the split and will end up owning a total 200 shares. If it is 3:2 split, you will get 50 extra shares (owning a total of 150).
While these splits have a lot of hype, they do not create real value. They are essentially a zero sum game. A cooking example might help. If you own a pie and split it into 10 pieces, you still own a pie. If you split it into 20 pieces (i.e., a 2:1 split of the 10 piece pie), you still own a pie. The pie didn't get bigger. To make the pie bigger, you have to add something else to it. Splitting the pie into more pieces means there are more pieces to go around and it makes it easier for someone to buy a smaller piece of pie or makes it easier for people to share their pie with others. You still have the same pie.
7 years ago
http://answers.yahoo.com/question/index?qid=20060929115640AA7LAOS
FEATURED CBD Life Sciences, Inc. (CBDL) Reaches Unprecedented Heights With Explosive Growth and Strategic Expansion in 2024 • Oct 8, 2024 8:00 AM
BNCM COMPLETES MERGER WITH DELEX HEALTHCARE • BNCM • Oct 8, 2024 9:54 AM
Unitronix Corp. to Invest $3 Million in USA Unity Coin Project • UTRX • Oct 7, 2024 7:08 AM
North Bay Resources Announces Assays up to 5 oz/ton Gold, 1.5 oz/ton Platinum, 0.5 oz/ton Palladium, and 0.5 oz/ton Rhodium at Mt. Vernon Gold Mine, Sierra County, California • NBRI • Oct 4, 2024 9:15 AM
Basanite, Inc. Appoints Ali Manav as Interim Chief Executive Officer • BASA • Oct 3, 2024 9:15 AM
Integrated Ventures Announces Launch of MedWell Facilities, LLC and Lease Agreement with Giant Fitness Clubs • INTV • Oct 3, 2024 8:45 AM