Stock Split

✅ 1️⃣ Improve Liquidity & Trading Volume – A stock split increases the number of shares available, making it easier for investors to buy and sell, thereby boosting trading activity.

✅ 2️⃣ Make Shares More Affordable – When a stock price becomes too high, retail investors may find it expensive. A split reduces the per-share price, making it more accessible to a broader investor base.

✅ 3️⃣ Attract Retail Investors – Lower share prices appeal to small investors who may not have been able to buy shares before the split.

✅ 4️⃣ Psychological Boost & Market Perception – A stock split is often seen as a positive signal that the company is performing well and expects future growth, increasing investor confidence.

✅ 5️⃣ No Change in Fundamentals – A split does not impact the company’s earnings, revenue, or market cap—it’s just a change in share structure. However, it can indirectly boost demand and stock price over time.

✅ 6️⃣ Align Stock Price with Market Peers – If a company's share price is much higher than its industry peers, a split brings it to a comparable range, making it more attractive for investors.

✅ 1️⃣ Share Price Decreases Proportionally – A stock split lowers the per-share price based on the split ratio. However, the total value of an investor's holdings remains the same.

🔹 Example: If a company announces a 2:1 stock split and the stock was trading at ₹1,000 per share, the new price will be ₹500 per share, but the investor will have twice the number of shares.

✅ 2️⃣ Market Capitalization Remains Unchanged – A stock split does not change the company’s total market value. The increase in the number of shares is exactly offset by the decrease in price per share.

✅ 3️⃣ Potential Short-Term Increase in Demand – While the split itself does not add value, the lower price can attract more investors, increasing demand and possibly driving the price up post-split.

✅ 4️⃣ No Impact on Fundamentals – Earnings per share (EPS), revenue, and other key financials adjust proportionally, but the company's intrinsic value remains the same.

✅ 1️⃣ Increase in Number of Shares – After a stock split, an investor receives additional shares based on the split ratio.

✅ 2️⃣ Proportional Adjustment – The total value of the investment remains the same, but the per-share price decreases, and the number of shares increases proportionally.

🔹 Example:

• If an investor holds 100 shares of a company before a 2:1 stock split, they will now have 200 shares post-split.
• If the company announces a 3:1 stock split, the investor’s 100 shares will become 300.

✅ 3️⃣ No Change in Ownership Percentage – The investor’s overall stake in the company remains the same, as all shareholders receive additional shares in the same proportion.

✅ 1️⃣ EPS Decreases Proportionally – Since a stock split increases the number of outstanding shares, the earnings per share (EPS) decreases in the same ratio. However, the company’s total earnings remain unchanged.

🔹 Example:

• Before a 2:1 stock split, if a company has ₹10 crore in net profit and 10 lakh shares, the EPS would be calculated based on 10 lakh shares.
• After the split, the total shares double to 20 lakh, so EPS gets adjusted downward proportionally.

✅ 2️⃣ No Change in Total Earnings – A stock split does not impact the company’s actual profitability, only how earnings are distributed per share.

✅ 3️⃣ No Negative Impact on Fundamentals – While EPS declines, it does not mean the company is earning less; it’s just an accounting adjustment due to the higher number of shares.

✅ 1️⃣ Meaning of Reverse Stock Split – A reverse stock split is when a company reduces the number of its outstanding shares by merging multiple shares into one. As a result, the share price increases proportionally, but the total market capitalization remains unchanged.

🔹 Example:

• In a 1:10 reverse stock split, 10 existing shares are combined into 1 new share.
• If an investor had 1,000 shares before the reverse split, they would now have 100 shares, but at a higher price per share.

✅ 2️⃣ Reasons for a Reverse Stock Split

🔹 Avoiding Delisting – Stock exchanges often have a minimum price requirement for listing. If a stock falls below that level, a reverse split helps push the price up and maintain the listing.

🔹 Improving Market Perception – A very low stock price can create a negative perception among investors. A reverse split helps position the company as more stable.

🔹 Attracting Institutional Investors – Many institutional investors and funds avoid penny stocks or shares priced below a certain threshold. A reverse split makes the stock more appealing to them.

🔹 Reducing Share Volatility – Stocks with very low prices can be highly volatile. A higher price post-reverse split can help stabilize price movements.

✅ 3️⃣ Impact on Investors – The total investment value remains the same, but the number of shares reduces, and the per-share price increases proportionally. However, reverse splits are often seen as a warning sign if done due to financial trouble.

✅ 1️⃣ Increased Liquidity – A stock split increases the number of shares available in the market, making it easier for investors to buy and sell. With more shares in circulation, trading becomes more fluid.

✅ 2️⃣ Higher Trading Volumes – Lower per-share prices tend to attract more retail investors, leading to a rise in daily trading volumes. Stocks often see a temporary surge in demand after a split.

✅ 3️⃣ More Participation from Small Investors – A high-priced stock may be out of reach for some investors. After a split, the reduced price makes it more affordable, leading to increased investor participation.

✅ 4️⃣ Potential Price Volatility – While increased liquidity generally reduces volatility, a sudden rise in trading activity post-split can cause short-term price fluctuations.

✅ 5️⃣ No Change in Fundamentals – Although liquidity improves, the company’s intrinsic value remains the same. The split does not directly impact profitability, revenues, or business operations.

✅ 1️⃣ Record Date – This is the cut-off date set by the company to determine which shareholders are eligible for the stock split. Investors who hold shares on or before this date will receive additional shares after the split.

✅ 2️⃣ Ex-Split Date – This is the first trading day when the stock starts trading at the adjusted (lower) price after the split. Investors who buy shares on or after the ex-split date will get shares at the new split-adjusted price.

🔹 How It Works:

• If a company announces a 2:1 stock split with a record date of March 10, investors must own shares by March 9 (T+1 settlement in India) to be eligible.
• The ex-split date will be March 9, meaning from this date, the stock will trade at the new lower price.
• The additional shares are credited to eligible investors after the record date.

✅ 3️⃣ Key Point – If you buy shares on or after the ex-split date, you will not receive extra shares, but you will buy them at the new adjusted price.

✅ 1️⃣ Lower Share Price Increases Accessibility – A stock split reduces the per-share price, making it more affordable for small investors who may have found the stock too expensive earlier.

✅ 2️⃣ Psychological Appeal – Many retail investors perceive a stock split as a positive signal that the company is growing, which can boost confidence and attract more buyers.

✅ 3️⃣ Increased Liquidity & Trading Volumes – With more shares available, trading activity generally rises, making it easier for retail investors to enter and exit positions.

✅ 4️⃣ More Portfolio Diversification – A lower stock price allows retail investors to buy more shares within their budget, enabling better portfolio allocation.

✅ 5️⃣ Historical Trend of Post-Split Gains – Many stocks tend to see increased demand and price appreciation after a split due to renewed interest, encouraging more retail participation.