What is a Forward Stock Split?
A forward stock split proportionally issues more shares to present shareholders, increasing a company's share count.
The split ratio determines how many new shares are issued for each current share, such as a 2-for-1 or 3-for-2 split.
Since market capitalization remains unchanged, the share price decreases in proportion to the split ratio.
Companies may pursue splits to push share prices into a more optimal trading range.
Splits multiply the number of shares outstanding by the split ratio. A 2-for-1 split doubles outstanding shares.
Though stockholders receive more shares, their proportional ownership stake and voting rights remain the same.
Metrics like earnings per share (EPS) and book value per share decrease in line with the share price after a split.
By lowering the share price, splits can stimulate higher liquidity by making shares more accessible to retail investors.
The ex-date is when the stock begins trading at the new split-adjusted price and terms.