Stock Splits Matter: What's Coming Up This Month?

"When a company effectively divides each share of its stock into two or more shares, the stock is said to have split. Looked at another way, the company issues additional shares to each shareholder proportionally based on their holdings. While the change lowers the value of each share, note that the value of an investor's holdings remains the same. The stock's overall market value also remains the same."

"The most common stock split ratios are two for one and three for one. That means each share an investor holds effectively becomes two or three shares. In other words, a two-for-one split doubles the number of shares held while the value of each share likely is halved. A reverse stock split works in the opposite direction. For instance, a one-for-two split would reduce the number of shares held by half, but the value of each remaining share would increase."

"Perhaps the most anticipated of last year was the 10-for-1 split from artificial intelligence darling Nvidia Corp. ( NASDAQ: NVDA) in June. This was at about the time the stock lost its abundant momentum. Afterward, shares traded mostly between $99 and $135 apiece, until October. However, investor concern about delays in new chip shipments likely had a bigger impact on shares than the stock split."

Stock splits have become less common than decades ago, but several notable splits occurred recently, including Netflix and ServiceNow, and Southern Copper Corp. plans a split tied to its quarterly dividend. Nvidia completed a 10-for-1 split in June, after which shares traded mostly between $99 and $135 until October, with shipment delays exerting greater influence than the split. A stock split issues additional shares proportionally to holders, lowering per-share price while leaving investor holdings and overall market value unchanged. Common splits are two-for-one and three-for-one; reverse splits consolidate shares to avoid penny-stock status or meet listing rules. Research indicates post-split performance is roughly balanced between gains and losses.

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