why do companies go through the hassle and expense of a stock split first a company often decides on a split when the stock price is quite high making it expensive for investors to acquire a standard board lot of 100 shares 
second the higher number of shares outstanding can result in greater liquidity for the stock which facilitates trading and may narrow the bid ask spread increasing the liquidity of a stock makes trading in the stock easier for buyers and sellers this can help companies repurchase their shares at a lower cost since their orders will have less of an impact on a more liquid security while a split in theory should have no effect on a stock s price it often results in renewed investor interest which can have a positive effect on the stock price while this effect may wane over time stock splits by blue chip companies are a bullish signal for investors a stock split may be viewed by some as a company wanting a bigger future runway for growth for this reason a stock split generally indicates executive level confidence in the prospect of a company many of the best companies routinely see their share price return to levels at which they previously split the stock leading to another stock split walmart for instance split its stock 11 times on a 2 for 1 basis between the retailer s stock market debut in october 1970 and march 1999 an investor who bought 100 shares in walmart s initial public offering ipo would have seen that stake grow to 204 800 shares over the next 30 years without any additional purchases 1in the u k a stock split is referred to as a scrip issue bonus issue capitalization issue or free issue not all facets of a stock split benefit a company the process of a stock split is expensive requires legal oversight and must be performed in accordance with regulatory laws the company wanting to split their stock must pay a great deal to have no movement in its over market capitalization value a stock split isn t worthless and it doesn t impact a company s fundamental position it will therefore not create additional value some compare a stock split to cutting a piece of cake if the dessert tastes horrible it doesn t matter whether it has been cut into 10 pieces or 20 pieces there are also other implications for intentionally reducing the company s share price public exchanges such as the nasdaq require the stock to trade at or above 1 should a share price drop below 1 for thirty consecutive days the company will be issued a compliance warning and will have 180 days to regain compliance should the company s stock price still not meet minimum pricing requirements the company risks being delisted 2example of a stock splitin august 2020 apple aapl split its shares 4 for 1 3 right before the split each share was trading at around 540 after the split the price per share at the market open was 135 approximately 540 4 an investor who owned 1 000 shares of the stock pre split would have owned 4 000 shares post split apple s outstanding shares increased from 3 4 billion to approximately 13 6 billion while the market capitalization remained largely unchanged at 2 trillion a company may choose to split its stock as many times as it would like for instance apple also split its stock 7 for 1 in 2014 2 for 1 in 2005 2 for 1 in 2000 and 2 for 1 in 1987 to convert a quantity of pre split shares to post split shares across multiple splits multiple the ratio value of each split together for example a single pre split share in 1987 would have eventually been split into 224 shares after the 2020 split this is determined by multiplying 4 7 2 2 and 2 stock splits vs reverse stock splitsa traditional stock split is also known as a forward stock split a reverse stock split is the opposite of a forward stock split a company carrying out a reverse stock split decreases the number of its outstanding shares and increases the share price proportionately as with a forward stock split the market value of the company after a reverse stock split remains the same a company that takes this corporate action might do so if its share price had decreased to a level at which it runs the risk of being delisted from an exchange for not meeting the minimum price required for a listing certain mutual funds may not invest in stocks priced below a preset minimum per share a company might also opt for a reverse split to make its stock more appealing to investors who may perceive higher priced shares as more valuable a reverse forward stock split is a special stock split strategy used by companies to eliminate shareholders holding less than a certain number of shares a reverse forward stock split consists of a reverse stock split followed by a forward stock split the reverse split reduces the overall number of shares a shareholder owns causing some shareholders who hold less than the minimum required by the split to be cashed out the forward stock split then increases the number of shares owned by the remaining shareholders 