# Stock split

> A corporate action that increases a company's share count by a fixed ratio and cuts the per-share price proportionally, leaving market value unchanged.

Source: https://www.quantisnow.com/glossary/stock-split
Topic: Glossary / Corporate actions
Also known as: forward stock split, forward split, share split
Last updated: 2026-10-27

A stock split is a corporate action in which a company multiplies its number of shares outstanding by a fixed ratio, such as 2-for-1 or 4-for-1, and the share price drops by the same factor. Each shareholder owns more shares, but the total value of the position and the company's [market capitalization](https://www.quantisnow.com/glossary/market-capitalization) do not change.

## How it works

The board approves the split and announces the ratio, a record date and the date shares begin trading on a split-adjusted basis. Some splits also need a shareholder vote to raise the number of authorized shares. On the effective date, brokers credit the extra shares and historical prices, [earnings per share](https://www.quantisnow.com/glossary/earnings-per-share), dividends per share and analyst price targets are all adjusted by the ratio. Listed options are adjusted by the Options Clearing Corporation so that contract holders are not harmed.

## Why it matters for traders

A split does not change fundamentals, but announcements often draw buying interest. Traders read them as a sign of management confidence after a long run-up, and a lower share price can widen retail participation and make options contracts cheaper in dollar terms. Watch the announcement date and the first split-adjusted trading day, both of which can bring elevated volume. A common trap is comparing unadjusted historical prices on a chart or screener and mistaking the split for a crash.

## Example

Apple effected a 4-for-1 split on August 31, 2020. A holder of 100 shares at about $500 before the split held 400 shares at about $125 afterward, still worth about $50,000. Tesla's 5-for-1 split took effect the same day.

For a hypothetical case, Northwind Software (NWSW) trades at $900 with 50 million shares, a $45 billion market cap. After a 3-for-1 split it has 150 million shares at $300, still $45 billion.

## FAQ

### Does a stock split make a stock cheaper?

Only per share. The value of the whole company and of each shareholder's stake is the same immediately after the split.

### What happens to my options after a stock split?

Listed options are adjusted. In a 2-for-1 split, one call with a $100 strike typically becomes two calls with a $50 strike, so the position's economics are preserved.

## Related terms

- [Reverse stock split](https://www.quantisnow.com/glossary/reverse-stock-split.md): A corporate action that combines existing shares into fewer shares at a higher price, often used to regain compliance with exchange minimum bid rules.
- [Shares outstanding](https://www.quantisnow.com/glossary/shares-outstanding.md): The total number of a company's shares currently held by all shareholders, including insiders and institutions, excluding treasury shares.
- [Market capitalization](https://www.quantisnow.com/glossary/market-capitalization.md): The total market value of a company's outstanding shares, calculated as the share price multiplied by the number of shares outstanding.
- [Earnings per share (EPS)](https://www.quantisnow.com/glossary/earnings-per-share.md): A company's net income available to common shareholders divided by its weighted average shares outstanding, reported as basic and diluted figures.
- [Options chain](https://www.quantisnow.com/glossary/options-chain.md): A table listing every available call and put for a stock, organized by expiration date and strike, with prices, volume and open interest.

## On Quantisnow

- [Stock splits and corporate actions](https://www.quantisnow.com/guides/stock-splits-and-corporate-actions)
- [Corporate actions: splits and ticker changes](https://www.quantisnow.com/corporate-actions)
- [SEC Form 8-K filings](https://www.quantisnow.com/categories/8-k)
- [Latest stock split announcements](https://www.quantisnow.com/top/stock-splits)
- [Stock average cost calculator](https://www.quantisnow.com/tools/average-cost-calculator)