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What are stock splits and mergers in the US stock market?
1.Share Split
When the stock price is too high, companies usually choose to split stocks to lower the stock price.
For example, in the common 1:2 stock split, assuming the original stock price is 200 and the outstanding shares are 200000, after the split, the stock price will become 100 and the outstanding shares will become 400000. After the stock split, the equity of shareholders remains unchanged, and the market value of the company also remains unchanged. What changes are the stock price and the number of outstanding shares.
For example, in the common 1:2 stock split, assuming the original stock price is 200 and the outstanding shares are 200000, after the split, the stock price will become 100 and the outstanding shares will become 400000. After the stock split, the equity of shareholders remains unchanged, and the market value of the company also remains unchanged. What changes are the stock price and the number of outstanding shares.
2.Reverse Split
When the stock price is too low, the company will consider merging stocks to increase the stock price.
For example, in a common 4:1 merger, assuming the original stock price is 10 and the outstanding shares are 100000, after the merger, the stock price will become 40 and the outstanding shares will become 25000. After the merger, the shareholders' equity remains unchanged, and the company's market value also remains unchanged. What changes are the stock price and the number of outstanding shares.
For example, in a common 4:1 merger, assuming the original stock price is 10 and the outstanding shares are 100000, after the merger, the stock price will become 40 and the outstanding shares will become 25000. After the merger, the shareholders' equity remains unchanged, and the company's market value also remains unchanged. What changes are the stock price and the number of outstanding shares.
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