There have been a lot of notable stock splits in recent weeks, which can cause a lot of questions and confusion for newer investors. A stock split occurs when a business issues additional shares, driving down the price of each individual share to maintain the overall market capitalization. For example, after a 10-for-1 stock split, each previous share is worth 10% of its previous value. But current investors don’t lose anything. If you already own one share, you will own 10 shares after the split. The primary goal of a stock split is to make shares more affordable for new investors.
A reverse stock split does the opposite. The company consolidates shares to increase their price. For example, in a reverse 1-for-10 split, every 10 shares become a single share. This is most common among companies with very low share prices, since they risk being delisted from the major stock exchanges if the price drops too low.
Here's What to Watch For
Broadcom is a major player in the semiconductor industry that recently had a 10-for-1 stock split. Its share price had skyrocketed by about 500% over the past five years to an eye-popping $1700. After the split, each share is worth about $170. This is expected to bring in new investors, and many analysts consider the stock a smart buy.
United States Lime & Minerals just completed a 5-for-1 stock split. While its growth hasn’t been as explosive as Broadcom’s, it has been growing steadily for a number of years. The company hopes to make its stock more attractive to both employees and other investors by lowering the per-share price.
Several other businesses have recently announced reverse stock splits. Three biotech companies--Calidi Biotherapeutics, Catheter Precision, and Alzamend Neuro—recently approved 1-for-10 reverse splits. Smart eyeglass company Innovative Eyewear announced a 1-for-20 reverse split, while SMX (Security Matters) PLC approved a 1-for-75 reverse split. In all cases, these were done primarily to ensure that the companies remain listed on the relevant stock exchanges.
Stock splits often, though not always, herald a jump in growth, making them a potential good buy. But before you jump on board, be sure to do your due diligence. Each company is unique, and there are never any guarantees. Make sure you know what you’re getting into rather than simply buying stock in the wake of a recent split.
Neither Lisa Fritscher nor Stocks.News have positions in this company.
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Contributing Writer
Lisa Fritscher has been a contributing writer for App.Stock.News since 2024. Lisa has been interested in investing since winning The Stock Market Game in high school. In more than a decade as a professional writer, she has written consumer-facing financial information and advice articles for a wide variety of publications. She has a Bachelor of Arts in Psychology from the University of South Flori...