ShmoopTube
Where Monty Python meets your 10th grade teacher.
Search Thousands of Shmoop Videos
Trusts and Estates Videos 178 videos
What is bankruptcy? Deadbeats who can't pay their bills declare bankruptcy. Either they borrowed too much money, or the business fell apart. They t...
A redemption charge is a charge applied when you redeem shares of a mutual fund in a deferred commission purchase structure.
What was the Tax Reform Act of 1986? Hit play to find out.
Finance: What Happens When your Stock Splits? 62 Views
Share It!
Description:
If you go to an arcade and want to play coin-operated games, you will often exchange $1 bills for (4) quarters at a time. This is the equivalent of a 1 for 4 stock split. The net value is the same, but you have more small units instead of a single larger one. The advantage for a stock is that its lower price represents an easier entry level for new investors to get involved, since buying shares of a stock at 25 is easier for an initial portfolio allocation than at 100. A forward split is usually an indication that a company is growing and attracting more investors. Conversely, a reverse split would be like getting a dollar for your 4 quarters. Reasons for a reverse split could be too much stock outstanding to move the stock price, flushing out naked short sellers, or a post reverse merger stock overhang cleanup.
- Social Studies / Finance
- Finance / Financial Responsibility
- College and Career / Personal Finance
- Life Skills / Personal Finance
- Finance / Finance Definitions
- Life Skills / Finance Definitions
- Finance / Personal Finance
- Courses / Finance Concepts
- Subjects / Finance and Economics
- Finance and Economics / Terms and Concepts
- Terms and Concepts / Accounting
- Terms and Concepts / Bonds
- Terms and Concepts / Careers
- Terms and Concepts / Company Management
- Terms and Concepts / Investing
- Terms and Concepts / Regulations
- Terms and Concepts / Stocks
- Terms and Concepts / Tax
- Terms and Concepts / Trading
- Terms and Concepts / Trusts and Estates
Transcript
- 00:00
Finance allah shmoop shmoop what happens when your stock splits
- 00:07
Well for one thing it's not is embarrassing Is when
- 00:10
your pants split Trust me thie Answer Mohr pie pieces
- 00:15
that's What happens when your stock splits That's it well
- 00:17
here's the pie before the split This pie represents the
Full Transcript
- 00:21
dessert company pastry holic synonymous And if you look carefully
- 00:25
with a big fat zoom in microscope while you khun
- 00:29
see ten million slices of this pie that's ten million
- 00:34
shares currently on the market trading that comprise the value
- 00:37
of this entire company Well the stock has done great
- 00:40
It has had a big fat rise in zooming to
- 00:43
one hundred dollars a share valuing the company at a
- 00:46
billion dollars How no that's not magic With the stock
- 00:49
market paying one hundred dollars a share for pastry hollis
- 00:52
anonymous multiplies that hundred dollars by the ten million shares
- 00:56
to get the market capitalization or market value of the
- 01:00
company Yep a cool bill in this case Well the
- 01:03
company wants to split the stock for four for one
- 01:06
to make it easier for less wealthy people toe by
- 01:09
at least one hundred shares And if people buy fewer
- 01:12
than a hundred shares While there's usually much more commission
- 01:15
they pay for not buying what's called around lot so
- 01:18
the company splits the stock for for one and now
- 01:22
instead of ten million tiny slices they have forty million
- 01:26
teeny tiny slices and no that's not by magic For
- 01:30
everyone who had one share before Now they have four
- 01:33
The stock price should fall on the day of the
- 01:36
split from one hundred bucks to twenty five bucks a
- 01:38
share and that's it pastry Hollis anonymous now has forty
- 01:41
million shares outstanding with wall street paying twenty five bucks
- 01:45
a share for them and voila the value of the
- 01:47
company or its market capitalization has not changed it's still
- 01:52
that same cool bill we started out with on ly
- 01:55
Now that cool bill is chopped up into smaller pieces
- 01:59
Wow counting has never made us so hungry for a
- 02:02
nice piece apply Is this gluten free that maybe tax 00:02:05.7 --> [endTime] free You got any tax free pies
Related Videos
GED Social Studies 1.1 Civics and Government
What is bankruptcy? Deadbeats who can't pay their bills declare bankruptcy. Either they borrowed too much money, or the business fell apart. They t...
What's a dividend? At will, the board of directors can pay a dividend on common stock. Usually, that payout is some percentage less than 100 of ear...
How are risk and reward related? Take more risk, expect more reward. A lottery ticket might be worth a billion dollars, but if the odds are one in...