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What is Stock Split?

 What is Stock split?

Stock Split means breaking the stock unit value in small value. But it doesn't affect the stock market value. Breaking the stock unit value in small number increases the quantity of stock held in one shareholder's hand. If he/she already has the stock in higher unit value then after stock split shareholder has more than one share of that company according to their previous stock value. 

Stock split only increases the number of shares with no effect in stock market value.

Stock Split helps:

·         It helps to increase the stock quantity in market without affecting the market price of stock.

·         With the help of it company need not to invest more fund to increase the quantity of shares in market.

For example: Company XYZ issue 6000 shares of Rs. 100 each. One share price of a company is Rs. 100. Company decides to split the stock.  So, now the company issues shares of Rs.50 each. It means the value of one share is Rs. 50. Now any individual can purchase shares of a company to become its shareholder and the existing shareholders who have 1 or more shares of a company can get more number of shares according to their previous investment like if they have 5 numbers of shares of a company whose face value is Rs. 100 now they hold 8 number of shares of that company and if any shareholder has 1 share of a company now he hold 2 shares of that company. Like a same way if any shareholder who has 2 shares of a company, he held 4 shares of a company after stock split.

Why Stock Split required?

·         The requirement of stock split is to increase the number of shareholders of a company in a market.

·         Mostly the big company use the stock split tool to reduce the face value of share. So that, small investors can buy it easily.

Example of Stock Split Company:

·         GOOGLE split its stock (20:1):- GOOGLE in July 2022 split its stock in 20:1 means shareholders hold 20 shares in place of 1 share.

·         Tesla stock split (3:1): In 2022 Tesla split its stock in 3:1 it means shareholders who hold one share of Tesla Company after stock split he will hold 3 shares of that company.

·         Amazon stock split (20:1): In June 2022 Amazon split its stock in 20:1 means shareholders who hold 1 shares of Amazon after stock split he holds 20 shares of that company.

·         AJOONI BIOTECH stock split (Rs.10 face value to Rs. 2 face value): In 2022 AJOONI BIOTECH split its stock value by reducing the stock value from Rs. 10 to Rs. 2. It means shareholder who holds 2 shares of Rs. 10 previously now he will get 10 shares of Rs. 2.

·         State Bank of India split its stock by reducing the stock face value from Rs.10 to Rs. 1 in 2016.

·         Tata Motors split its stock by reducing the face value of stock from Rs. 10 to Rs. 2 in 2016.

·         Bajaj Finserv split its stock by reducing the stock face value from Rs. 5 to Rs. 1 in September 2022.

·         Tata Steel split its stock by reducing the stock face value from Rs. 10 to Rs. 1 in July 2022.

 

 


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