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Stock Split

corporate finance
Definition
A corporate action that divides existing shares into multiple shares, reducing the price per share proportionally without changing total market value.

Explanation

A 4-for-1 stock split turns each $400 share into four $100 shares. The investor's total value is unchanged — they own 4x more shares at 1/4 the price. Companies split shares to improve liquidity and accessibility (some retail investors prefer lower-priced shares). Major recent splits: Apple 4:1 (2020), Tesla 3:1 (2022), NVIDIA 10:1 (2024). Research shows modest positive returns around split announcements, possibly because splits signal management confidence and increase retail investor participation.

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