# How can I calculate a stock split

## Stock split: The reason for this measure is simply explained

Many investors are familiar with this situation: suddenly the share price has halved.

The telephone receiver is frantically picked up and the investment advisor is asked what the reason for the sudden drop in prices is.

More on the subject: Stock split - the inexplicable drop in price?

It quickly turns out: the shares have not really fallen in price, but there was just a stock split.

Reason enough for the investor to shed light on the motivation for this measure.

A publicly traded company has the option of dividing shares in different ratios - the result is a stock split.

One reason for this may be that the course is supposed to be optically cheaper.

### Stock split: The reason is often a strong price increase

Often shares are split in a ratio of 1: 2 or 1: 3, which increases the number of shares outstanding.

The company or stock market value remains unchanged. Like the dividend, the share split is decided by the general meeting.

Public companies often do such stock splits when the price of the stock has risen sharply. The split should make the price visually cheaper again, and the attractiveness of the shares should increase for small investors.

At the same time, the share split is also intended to increase liquidity, as the number of shares in circulation increases.

### Stock split - the reason can also be a psychological measure

A stock split is not infrequently also a psychological measure. The company's equity remains unchanged. The share price is only apparently cheaper and is intended to encourage investors to invest.

The reason: Many small investors often only invest four-digit or low five-digit sums. If the price is in the double-digit range, the small investor receives more shares for his money.

More on the subject:Investors prefer to buy cheaper stocks

An example: The share price of ABC AG has risen to € 100. The company resolves a 1: 2 share split. The investor then receives an additional share certificate for one share that is in the custody account.

At the same time, ABC AG paper is cheaper to € 50. The number of shares outstanding doubles.

If the investor held 100 shares before the split, 200 will now appear in the portfolio. The portfolio value remains unchanged overall.

more on the subject: Companies use stock splits to save costs

### Reverse split

Conversely, stock corporations can also have shares pooled. Such a reverse stock split is also called a reverse split.

In the case of a reverse split in the ratio of 2: 1, 2 shares become 1 share.

The reverse stock split is also a measure to visually increase the share price. This measure does not increase the market value either.

The reverse split is particularly popular with Nasdaq-listed companies when the price drops below the US \$ 1 mark.

The reason: If the price of a company listed on the American high-tech stock exchange Nasdaq is below the mark of US \$ 1 for 30 consecutive days, the company is at risk of so-called delisting.

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