What’s a stock split?

What’s a stock split?

I was a recent shareholder in HMNY or Helios and Matheson Analytics Inc. a while back. If you don’t recognize this company you sure as hell will recognize it’s signature product: Moviepass. As a recent shareholder of the company I noticed the price fluctuation and wanted some explanation earlier this year. All things traced back to this concept of a stock split. I will try to explain this concept as easily as I can.

What is it?

It’s when a single share of a stock is split up into many more stocks. For example, 1 share worth a $100 can become 4 $25 shares. The cumulative value of the stocks remains the same: $4 x 25 = $100

The market cap of the company remains the same.

Why do companies do it?

Make the share available to more investors like me and you

  • Because the share price has decreased, more people (usually regular people like me and you) can buy into the company. Instead of being forced to buy 1 $100 stock, I can buy maybe 1 or 2 $25 shares. More like it 😌

The concept of a stock split is not to be confused with a reverse-stock split which is just the exact opposite. Instead of breaking down shares into smaller shares, you consolidate multiple shares into a single one.