What causes a stock split?

Stock splits are accounting adjustment to control the appearance of a stock. Companies can make a stock look expensive or cheap by increasing or decreasing the number of shares available. A decision to double the number of shares available for trading dillutes the value of existing stocks to half its former value, however, any stockholder that owns the stock prior to a split would also recieve an additional share for every one owned. For a stockholder, there is no real change in total value because it is just an adjustment. 100 shares worth $50 each would turn into 200 shares worth $25 each when a split occurs. In a reverse split the value of a share doubles and the total number of shares owned would be cut in half. The potential of a stock to rise further is high once a split occurs because it will look cheaper therefore increasing demand for it.

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