Question 1

What is a stock split?

Accepted Answer

A stock split increases shares outstanding while reducing price proportionally. Total market cap is unchanged. Companies split stocks when prices become very high to improve accessibility for retail investors.

Question 2

What is a reverse stock split?

Accepted Answer

A reverse split reduces shares and increases price proportionally. Companies use it to boost share price, often to meet exchange minimum price requirements.

Question 3

Does a split change my investment value?

Accepted Answer

No - in theory, total value is unchanged. 100 shares at $50 = $5,000. After a 2:1 split: 200 shares at $25 = $5,000.

Question 4

What are common split ratios?

Accepted Answer

Forward: 2:1 (most common), 3:1, 4:1, 5:1. Reverse: 1:2, 1:5, 1:10. Apple did 7:1 in 2014, 4:1 in 2020. Tesla did 5:1 in 2020.

Question 5

How do splits affect tax cost basis?

Accepted Answer

Cost basis per share adjusts proportionally. Your broker should auto-adjust records. No tax event occurs at split - you only owe taxes when you sell.

	Before	After
Shares	100	200
Price per Share	$50.00	$25.00
Total Value	$5,000.00	$5,000.00

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