What is a share split?

A stock split is the process by which the nominal value of a share is reduced, whereby existing shares are split into several equal parts. This is often done to increase the tradability of the share, especially when the price of a share is high, making it more attractive to retail investors.

A stock split has two important consequences:

• The nominal value of the shares is adjusted. The market value per share changes proportionally with the stock split. For example, a share with a nominal value of €10 is split into 4 shares of €2.50. If the stock price before the split was €60, it will be €15 after the split.
• A stock split also affects the contract size of stock options listed on these shares. It is an example of a 'corporate action'.

Example: "Tesla announced a five-for-one stock split, which lowered the share price from about $1,400 to $280 per share after the split."