What Are Stock Splits?

Companies split their stock for a variety of reasons and in a variety of ways. Here's what you need to know about stock splits, how the process works, why it can have a positive or negative impact on a company's market value, and other important details.

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Woman and man pushing a coin split in half back together — Image Source: Getty Images

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Outstanding Shares

Outstanding shares refers to the number of shares of common stock a company has issued to investors and company executives.

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An infographic defining and explaining what stock splits are and how they work. — Source: The Motley Fool

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The bottom line on stock splits

To sum it up, a stock split doesn't affect the overall market capitalization of a company all by itself. Rather, it is simply a change in the share count or structure of a company's stock. If you like a stock, buy before or after a stock split -- there's no need to buy shares before a split happens.

However, while a split itself doesn't affect the value of a stock, the circumstances surrounding the stock split, as well as the split-adjusted stock price, can certainly be a positive or negative catalyst.

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst and personal finance expert covering financial stocks, REITs, SPACs, and personal finance. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, The National Desk, and other TV networks and publications for his financial, stock market, and investing expertise.

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@MattFrankelCFP

Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Nvidia, Tesla, and The Trade Desk. The Motley Fool has a disclosure policy.