Stock Split

A stock split divides each existing share into multiple shares, cutting the price proportionally while leaving every holder's dollar value unchanged. In a 4-for-1 split, 100 shares at $400 become 400 shares at $100 — same $40,000 position, same ownership percentage, same market cap.

Companies split to keep the per-share price in a range that feels accessible and keeps option contracts (which cover 100 shares each) affordable to trade. Nothing about the business changes, yet split announcements often trade like good news — partly signal (boards split stocks they expect to keep rising), partly the liquidity that a lower price and tighter per-share spread invite.

Splits also ripple through price-weighted indexes: when a Dow component splits, its weight in the index drops because the Dow weights by share price, not company size.