What is a Stock Split?
A Stock Split is a corporate action wherein a company splits existing shares into multiple shares to boost liquidity. The primary motive of a stock split is to increase liquidity and make shares more affordable to small investors.
To understand this better, in a 2-for-1 stock split, a new share is issued for every share held by an investor. This means that:
- If there were 1 crore outstanding shares, there will be 2 crore shares post-split.
- The stock price gets halved (falls to the extent of the split).
- The face value of shares changes with respect to the split ratio (unlike bonus issues where the face value is unaffected).
- Existing shareholders will have the same amount of money invested, and will own more shares as a result of the split.
Important dates during a Stock Split:
For example, the IRCTC Board of Directors approves a 1:5 stock split on 12th August and related dates are announced. That is, every share with the current face value as Rs. 10 will be split into 5 shares of face value Rs. 2. If Mr Jomon holds 200 IRCTC shares, he will hold 1000 shares post-split.
| Date | Details |
|---|---|
| Declaration Date: 12th Aug | The day the stock split is announced to the public. |
| Ex-date: 28th Oct | To be eligible to receive shares as part of the split, purchases must be made on or before 27th Dec. |
| Record Date: 28th Oct | All shareholders of IRCTC as per company records on 28th Oct will receive split shares. |
| Credit Date | The day the split shares reflect in the demat accounts of eligible investors. |
Since we have shifted to the T+1 settlement cycle, the ex-date and record date for corporate actions fall on the same day.Still need help? Create Ticket
