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An issue forward split, commonly known as a stock split, occurs when a company increases the number of its outstanding shares by issuing more shares to existing shareholders at a predetermined ratio. This process reduces the price per share while keeping the company’s total market capitalization the same. Forward splits are often used to make shares more affordable to retail investors and increase market liquidity.
A company announces a 2-for-1 stock split, where shareholders receive one additional share for each share they already own, reducing the stock price by half while doubling the share count.
• Involves issuing additional shares to existing shareholders, reducing the price per share.
• Does not change the company’s market capitalization.
• Often used to increase liquidity and make shares more accessible to investors.
Companies issue forward splits to make their shares more affordable to retail investors and increase liquidity in the market.
Shareholders receive additional shares, but the total value of their holdings remains the same, as the price per share decreases proportionally.
The company’s market capitalization remains unchanged, as the increase in shares is offset by the decrease in price per share.
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