What Is a Stock Split?
With the recent Netflix stock split announcement, we thought it might be a good idea to address stock splits and the reasons companies decide to split their stock. If you aren’t already aware, Netflix (NFLX) announced a forward split at a rate of 10:1 last week. So, if you are a shareholder of that stock, you will notice that you now have more shares of Netflix, but the price per share will be lower.
A forward stock split is when a company increases the number of its outstanding shares by issuing additional shares to existing shareholders. A split changes the number of shares you own, but not the total value of your investment.
For example, in a 2-for-1 stock split, each share becomes two shares.
If you owned 10 shares at $100 each (worth $1,000 total), you would now own 20 shares at $50 each but still $1,000 total. It’s like exchanging a $20 bill for two $10s. Same value, different denomination.
Why Companies Split Their Stock
To Make Shares More Affordable for Retail Investors
When a company’s stock price climbs into the hundreds or thousands, it can become psychologically or practically harder for smaller investors to buy in—even though fractional shares exist. Splitting lowers the price per share, making it feel more accessible.
To Improve Liquidity
More shares at a lower price can mean more trading activity. Increased liquidity often reduces bid-ask spreads, making it easier for investors to buy and sell.
To Signal Confidence
Companies typically split their stock when things are going well—earnings are strong, growth is steady, and share prices are rising. Investors often interpret a split as a positive signal about future prospects.
More Shares, Lower Prices
Recent forward stock splits that were designed to make share prices cheaper1
| Company Name | Split Ratio | Pre-Split Ratio | Post-Split Ratio | Effective Date |
| Tractor Supply Co. (TSCO) | 5-for-1 | $300.00 | $60.00 | 12/20/24 |
| Palo Alto Networks (PANW) | 2-for-1 | $393.12 | $196.56 | 12/16/24 |
| Sony Group Corp. (SONY) | 5-for-1 | $95.25 | $19.05 | 10/9/24 |
| Super Micro Computer Inc. (SMCI) | 10-for-1 | $416.40 | $41.64 | 9/30/24 |
| NVIDIA Corp. (NVDA) | 10-for-1 | $1,208.88 | $120.88 | 6/10/24 |
1 Some well-known companies have split many times over the years. Example: Microsoft Corp. (MSFT) implemented nine forward stock splits between 1987 and 2003 (seven 2-for-1 splits and two 3-for-2 splits). Investors who bought 1,000 shares before 9/21/87 and held them through 2/18/03 would have seen their initial holdings grow to 288,000 shares after the ninth and final split. Source: Hartford Funds.
On the other hand, a reverse stock split reduces the number of shares and raises the price per share. Example: In a 1-for-10 reverse split, every 10 shares consolidate into one. Companies usually do this to avoid delisting from exchanges with minimum price rules and improve their imaged as very low stock prices can appear unstable. Reverse splits often carry negative signals, unlike regular splits.
Fewer Shares, Higher Prices
Notable reverse stock splits that were designed to boost lagging share prices
| Company Name | Reverse Split Ratio | Pre-Split Ratio | Post-Split Ratio | Effective Date |
| Xerox (XRX) | 1-for-4 | $7.34 | $28.24 | 6/14/17 |
| Alcoa Corp. (AA) | 1-for-3 | $9.08 | $22.50 | 10/16/16 |
| General Electric (GE) | 1-for-8 | $12.69 | $100.00 | 8/1/12 |
| Citigroup, Inc. (C) | 1-for-10 | $4.52 | $40.00 | 6/6/11 |
| AT&T, Inc. (T) | 1-for-5 | $13.51 | $25.41* | 11/18/02 |
* AT&T’s post-split share price was calculated after subtracting the value of its AT&T Broadband cable-TV assets, which were sold off to Comcast Corp. at the time of the stock split. Source: Hartford Funds.
Stock splits are one of those market events that get big headlines but don’t actually change the underlying value of your investment. They matter more for psychology, accessibility, and market mechanics than for financial fundamentals.
At Meridian, we continue to see a splitting of our responsibilities as we grow and mature as a company. In 10 years, a lot has changed since Sarah Yakel and I shared the first floor of our 1.5 room office! It is very nice to have trustworthy and smart people like Dan and Tyler (below) on our team. We recently enjoyed some time together outdoors for some fishing and mountain biking.
No fish were caught, but lots of fun was had!
Hello, isn’t it hard to fish while mountain biking?
Good luck!!
We discovered that the hard way!