Do stock splits bolster or hurt a company?
submitted by Gary

uniquium

Technically speaking, they don't actually change anything. The stock that's been issued still adds up to the same market cap the company had previously. That being said, appearance is everything, and stock splits always make a difference.

Generally speaking, a company will split when they've been growing consistently. They want to bring that share price down a bit, and that usually attracts new investors that wanted to get in at a lower cost. Not everyone wants to spend $800 on a single share, but if you bring that down to say $25, people will feel comfortable adding a few shares. So, the split itself doesn't change the company value, but it will spur new investors to hop on the train.

On the flip side, reverse splits generally happen when a company has lost a lot of value and their stock price looks bad. They may want to reverse split to make the shares look more valuable, or they may need to reverse split to meet requirements for listing on Nasdaq. They like their stock to be above $1. Anyway, a reverse split is usually viewed as a sinking ship, and many investors will bail when they see a reverse split announcement. That may continue for a while.

break an egg

A stock split usually doesn't hurt or help a company financially since it just changes the number of shares and their price. It can be good because it makes the stock cheaper per share, so more people might buy it. That can improve how the stock looks to investors, but it doesn't really change the company's actual value or performance.

fireball

A stock split itself doesn't directly impact a company's market value. It mainly increases the number of shares outstanding while proportionally reducing the stock price. So it all balances out as the same value in the end.

However, it can make shares more accessible to smaller investors, potentially boosting liquidity and investor interest. So, in the long run, it can be beneficial for the company's perception and trading activity, but it doesn't inherently make the company more profitable or stronger financially.

The math itself adds up to the same amount. It just changes the appearance of value, which does affect investor interest.