Learn the stock market › How listed companies work › Lesson 4 of 8
What is a stock split?
Same pie, more slices
It is still the same company, with the same profit and the same value. The number of shares changes, and the price changes by as much the other way.
| Step | Shares | Price | Value |
|---|---|---|---|
| Before | 100 | $50.00 | $5,000 |
| After 2-for-1 | 200 | $25.00 | $5,000 |
| After 4-for-1 | 400 | $12.50 | $5,000 |
| After a reverse 1-for-5 | 20 | $250.00 | $5,000 |
Your stake doesn't change either, and that is the difference from a share issue. The SEC puts it the same way: unlike issuing new shares, a split does not dilute existing owners. If the company pays a dividend, the amount per share falls in proportion. Old figures per share are restated, so earnings per share can be compared with earlier years.
A reverse split
A reverse split combines shares. In a 1-for-5, five shares become one, and the price becomes five times as high. That doesn't change the value either. GE Aerospace did a reverse split, 1-for-8, on Aug 2, 2021.
Companies with a very low price sometimes do it to lift the number. The SEC tells investors in very small stocks to look closely at a company that has recently done one.
Real splits
The latest among the 101 large US companies we follow. The ratio shows how many new shares one old share became.
| Company | Ratio | Day |
|---|---|---|
| KLA | 10-for-1 | Jun 12, 2026 |
| ServiceNow | 5-for-1 | Dec 18, 2025 |
| Netflix | 10-for-1 | Nov 17, 2025 |
| Palo Alto Networks | 2-for-1 | Dec 16, 2024 |
| Lam Research | 10-for-1 | Oct 3, 2024 |
What prices have tended to do after a split is worked out in the study on splits. The stock looks cheaper afterwards, but you pay the same for the same part of the company.
Test yourself
You own 50 shares at $300. The company does a 3-for-1 split. What do you have afterwards?
Sources
- US Securities and Exchange Commission, Stock Split, read on 5 November 2026.
- US Securities and Exchange Commission, Microcap Stock Basics, read on 5 November 2026.
How the price has moved: Why did KLA move?