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What are Stock Splits ?

A Stock Split occurs when a company reduces the price of shares and increases the quantity of shares accordingly in its capital base.

For example, if a shareholder had 100 Shares of a company ABC and if the company splits its shares 1:2, then after the split takes effect the shareholder will now hold 200 shares. The market price also will be reduced in accordance with the split ratio.

Companies split the shares usually to encourage more investors to buy their shares as the market price will have reduced after a split.

A Reverse Stock Split is the reverse of a regular share split.

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