What is a stock split?

• In a stock split, you get more shares, but each share is worth less.
• However, a stock split does not change the total value of your investment on its own.
• Be aware of key dates for when the split is processed and when the stock starts trading at its new price.
• A stock split may affect open orders, options, and dividends. Review your account and talk with a financial professional with any questions.

A stock split is a corporate action that changes the number of a company’s outstanding shares and adjusts the price per share by the same proportion. There are two kinds of splits: a forward stock split and a reverse stock split.

In a forward split, investors receive more shares at a lower price per share. A reverse split is the inverse of a forward split, resulting in shares being combined into fewer shares at a higher price per share.

The company’s market capitalization and total value of an investor’s position generally stay the same immediately after a split, before any market movement.

Companies may use a forward stock split after a substantial rise in the share price in order to bring the price per share into a range they believe is more accessible to investors. A lower quoted price may also make trading easier for investors and help the company administer any employee stock plans. However, a split does not improve the company’s underlying business or guarantee future returns.

No. By itself, a stock split does not change the total value of your investment. It changes the number of shares you hold, and the share price is adjusted proportionally to maintain your equity.

Stock split example

Take a look at this example of a 5-to-1 forward stock split:

Before XYZ split:

You own 100 shares of XYZ at $500 per share for a total market value of $50,000.

After XYZ split:

You’ll own 500 shares of XYZ at $100 per share for a total market value of $50,000.

The important thing to notice here is that the total value of your holding hasn’t increased or decreased. The only thing that changed is that you now own more shares at a lower price per share.

A reverse stock split lowers the number of shares a company has outstanding and raises the price of each share by the same proportion. Companies may do this to lift a very low share price, meet exchange-listing rules, or improve how the stock is viewed in the market. Like a forward split, a reverse split does not by itself change the total value of an investor’s holdings. However, depending on the company’s terms, investors may receive cash instead of a fractional share.

Forward vs. reverse stock split

The key dates in a stock split are the shareholder of record date, the payable date, and ex-date, which determine when the split is processed and when the stock begins trading at its adjusted price.

Shareholder of record date

Owning a stock is not the same as being the shareholder of record. Once your buy order is filled, you own the stock. This said, industry records generally reflect you as the shareholder of record on the date the trade settles, typically one business day after the trade date for most U.S. stock trades. This distinction is important because only official shareholders of record on the payable date participate in the stock split.

Payable date

This is when the company distributes the additional shares or processes the split adjustment. Account displays may update on or around this date according to the company’s terms and brokerage processing.

Ex-date

This is the date the stock begins trading on a post-split basis. When the market opens, quotes and eligible order values reflect the split-adjusted price.

After a stock split, your open orders, dividends, and options may be adjusted to reflect the new share price and share count.

What happens to open orders?

After a stock split, open orders may be adjusted, canceled, or left unchanged depending on the type of order you’ve placed. If you’ve placed an order that has been canceled, you will receive an Alert notification of the cancellation.

Orders that are not canceled may be adjusted automatically. For example, a limit buy order for 100 shares at $50 may become an order for 200 shares at $25 after a two-for-one split. Sell limit orders may not be adjusted in the same way. Following a split, be sure to review any open orders (both before and after the ex-date) and update quantities or prices when needed.

Will a stock split increase my dividends?

No. A stock split does not increase your total dividend income on its own. If the company’s total dividend payment remains unchanged, the dividend per share generally decreases in proportion to the split, leaving your total dividend payment about the same. Ultimately, your dividend income is based on the company’s dividend policy, which typically is determined by its profitability each quarter.

What happens to my options?

After a stock split, options contracts are generally adjusted so their overall economic value is preserved. Adjustments may affect the number of contracts, deliverable, multiplier, and strike price, depending on the split terms. For example, two calls with a $500 strike could become 10 calls with a $100 strike following a five-for-one split. Review the official contract adjustment and your account on or around the ex-date.

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CRC# 889340  (09/2026)