Stocks 101
What Is a Stock Split? (And Does It Make You Richer?)
How stock splits and reverse splits work, why companies do them, and why a split alone doesn't change what your shares are worth.
Beginner investing lessons and fake-money practice from the maker of Quoliv.
Quick answer
A stock split increases the number of shares and lowers the price per share by the same proportion, so the total value stays the same. In a 2-for-1 split, one $200 share becomes two $100 shares. The company isn't worth more and neither is your stake—the pizza is just cut into more slices.
What you’ll learn
- A split changes the number of shares, not the value of the company.
- 2-for-1: twice the shares at half the price.
- Companies often split to make the share price look more accessible.
- A reverse split combines shares and raises the price per share.
- Reverse splits sometimes happen when a stock's price has fallen very low.
This explanation is part of our Stocks lessons path, where you can explore the idea in short lessons and quizzes.
How a split works
| Before 2-for-1 split | After | |
|---|---|---|
| Your shares | 10 | 20 |
| Price per share | $200 | $100 |
| Your total value | $2,000 | $2,000 |
Same value, more slices. Nothing about the business changed.
Why companies split their stock
With fractional shares now common at many brokers, a high price per share matters less than it used to.
- A lower share price can feel more approachable to everyday investors.
- It can make it easier for employees to receive and trade stock.
- It sometimes signals management's confidence after a big price rise.
Reverse splits
A reverse split does the opposite. In a 1-for-10 reverse split, ten $1 shares become one $10 share. Companies sometimes do this to meet an exchange's minimum price rules after a big decline, so it's worth asking why it's happening.
Does a split make the stock a better buy?
Prices sometimes move around a split announcement because of attention and excitement, but the split itself doesn't change profits, debt, or the company's prospects. Judge the business, not the size of the slice.
Sources and methodology
This guide was written for education using the primary sources below. It does not evaluate your finances or recommend an investment. Read our editorial policy.