Stock Split Calculator | Reverse Split Calculator
Does any of your portfolio companies have an upcoming stock split or reverse stock split? Use our free stock split calculator to see how your shares will be affected.
This stock split calculator helps you see how a stock split will affect the shares you currently own.
A stock split increases the total number of shares available in a publicly traded company. However, as the number of available shares changes, the market capitalization of the company remains the same. This means that there is no stock price dilution. The MarketBeat Stock Split Calculator is a self-service tool that allows you to calculate how a stock split will affect the stocks you currently own. It can also help you decide if you want to take a new position in the stock before or after the stock split.
As simple as 1-2-3
To use the MarketBeat Stock Split Calculator, you will only need three pieces of information.
- The number of shares held before the split
- The current share price
- The split ratio (2:1, 3:1, etc.)
Once you have entered the data, simply click Calculate and the tool does the rest.
Here is an example. On June 6, 2022, Amazon (NASDAQ:AMZN) issued a 20:1 stock split. The company’s stock price the day before the split was around $2,400. So when the shares began trading the day after the split, the new stock price was $120.
If an investor owned 100 shares of Amazon before the split, those shares would have been valued at $240,000. After the split, the investor would now own 2,000 AMZN shares. However, each share would be worth $120, so the investor’s total equity remains at $240,000.
What is a reverse stock split?
Investors can also use the MarketBeat Stock Split Calculator to calculate what happens to their shares in a stock split. In a stock split, the number of shares outstanding decreases and the price per share increases.
Here is an example. ABC Company has 8 million shares outstanding valued at $2.50 per share and a market capitalization of $20 million. The company issues a 1:2 split. This decreases his outstanding shares from 8 million to 4 million and increases the value of those shares to $5.00. Therefore, just like in the case of a stock split, the market capitalization remains unchanged.
For an investor who owned 500 shares at $2.50. They now own 250 shares at $5.00 per share. But the intrinsic value of that asset in their portfolio would still be $1,250.
When is a stock split complete?
A stock split is an event similar to when a company issues a dividend. By this we mean that the board of directors of the company first announces its intention to divide the shares of the company. Currently, the Board is making four announcements:
- The stock split ratio – The most common ratios are 2:1 or 3:1. However, as our previous example shows, companies can announce the distribution agreed by the board of directors.
- The split recording date – Like a dividend record date, this is the date an investor must hold the stock to participate in the split.
- The split pay date – This is the day the stock split takes effect and shareholders receive their new shares.
- The split ex date – This is the day the stock will trade at the new adjusted split price.
Why do companies issue stock splits?
There are two main reasons companies issue stock splits. The most common reason is that the company believes its stock is overvalued. For example, if the stock is trading at levels well above other stocks in its sector, it may become less attractive to investors. By lowering the stock price, the company can make its stock more attractive and accessible to more investors.
A second reason a company may choose to issue a stock split is to increase the liquidity of its shares. Liquidity is a measure of how quickly stocks can be bought or sold in the market without driving up the stock price. Using our previous Amazon example, when a stock is trading at $2,400 per share, it can have a significant bid/ask spread. This gives the stock less liquidity. In this case, a stock split can help investors buy and sell shares of a company more easily.
Do stock splits add shareholder value?
Finance professionals and economics professors usually say that stock splits don’t make sense because the intrinsic value of the company doesn’t change. The value of the investment is the same, the only thing that changes is the number of shares held by an investor.
Yet companies issue stock splits. And there is circumstantial evidence that some investors take news of a stock split as a sign that there is interest in the stock. And there were several examples of stocks rising in value in the days and weeks following the initial post-split decline.