Legal Definitions - stock split

A stock split is when a company issues two or more new shares in exchange for each old share without changing the proportional ownership interests of each shareholder. For example, if a company does a 3-for-1 stock split, an owner of 100 shares would receive a total of 300 shares, or 3 shares for each share previously owned. This lowers the price per share and makes the stock more attractive to potential investors.

For instance, if a company's stock is trading at $300 per share and they do a 3-for-1 stock split, the new price per share would be $100. This makes the stock more affordable for investors who may have been hesitant to buy at the higher price.

Overall, a stock split does not change the value of a shareholder's investment, but it can increase liquidity and trading activity in the stock.