Stock split

A stock split is a pro-rata increase in shares outstanding, such as 2-for-1, that lowers the share price proportionally without changing any shareholder's total value or the firm's equity.

ByHoang TruongUpdated July 5, 2026

See it move

Loading infographic...

A stock split changes only how many shares represent the same total value. A company with 5,000,000 shares at €80 each, worth €400,000,000, announces a 4-for-1 split: shares outstanding rise to 20,000,000 and the price falls to €20, so 20,000,000 × €20 still equals €400,000,000.

Where it fits

SubjectCorporate FinanceCoreTopicDividend Policy & PayoutCore

The formula

LaTeX

N_{new} = N_{old} \times r

Variables

$N_{n e w}$: Shares outstanding after the split (shares)
$N_{o l d}$: Shares outstanding before the split (shares)
$r$: Split ratio (ratio)

Gives the number of shares outstanding after a split of ratio r (for example, r = 4 for a 4-for-1 split).

LaTeX

P_{new} = \frac{P_{old}}{r}

Variables

$P_{n e w}$: Share price after the split (€)
$P_{o l d}$: Share price before the split (€)
$r$: Split ratio (ratio)

Gives the adjusted share price after a split, keeping total market value unchanged.

Check yourself

PracticeCORE

A company has 8,000,000 shares outstanding trading at €150 per share, giving a market capitalisation of €1,200,000,000. It announces a 3-for-1 stock split. What is the share price immediately after the split, and what happens to market capitalisation?

Select an answer to check your understanding.