The stock market was having a strong day on Wednesday, but disruptive real estate brokerage eXp World Holdings (NASDAQ:EXPI) was a major standout. At 10 a.m. EST, the stock was up by more than 18% and had reached a new all-time high.
The reason for today's move is that eXp announced an unexpected stock split on Tuesday afternoon. The company announced that the stock will split 2-for-1, with shares beginning to trade on a split-adjusted basis on Feb. 16. In other words, if you own 100 shares of eXp in your brokerage account, you can expect to see 200 shares on Feb. 16.
According to the company's press release, the decision to split the stock was mainly based on providing flexibility for stock-based compensation programs for the company's agents, brokers, and other employees.
To be clear, a stock split doesn't do anything to boost a company's market value all by itself. If you own 100 shares of a stock trading for $80 before a 2-for-1 split, you'll theoretically own 200 shares worth $40 each after the split -- the overall value of the investment will remain the same.
However, there is a psychological effect when a company announces a split that can boost shares. We saw this with Apple in 2020. By choosing to split its stock, management is conveying confidence to investors that it expects the stock's price to continue to climb in the future.