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Author: rkmacdonald Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Re: Stock Split Date: 3/21/2001 6:06 PM
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Author: cfdunton Date: 3/21/01 1:42 PM Number: 28551
In the annual report for a company it lists among its 2000 highlights "declared two-for-one stock split in the form of a 100% stock dividend payable December 7, 2000."

Can any of you experienced investors explain what that means? I thought that when a stock split 2 for 1, you then had twice as many shares at half the price. Does the above mean that you would not have more shares?


The one issue not mentioned by the other posts is the price. When a company does a stock split, it can be any ratio; 2 for 1, 3 for 1, 4 for 1, etc. No one sets the price. When the extra shares are issued, the price changes automatically, driven by normal supply/demand market forces.

Similar forces are at work when a stock pays a dividend. On the day that the dividend is paid, the stock price automatically drops by an equal amount. For instance, if the company pays $1.00 per share in dividends the stock price will drop by $1.00. Of course, it then proceeds to move around further, due to normal market fluctuations, and the effect of small dividends is sometimes lost in the noise.

Russ
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