Stock split

A stock split ( engl. forward stock split) is the conversion of existing shares into a larger number of new shares with a lower nominal value, which is the opposite of a transaction technically share consolidation ( reverse stock split engl. ).

Implementation and characteristics

In a stock split is a procedure in which a corporation reduces the par value of the shares or the number of shares outstanding increased to reduce the price of a listed stock and make the shares easier to trade with it.

The performance of a stock split must be approved at the Annual General Meeting. This measure is actually purely psychological in nature, since nothing changes on the distribution of ownership first. The individual stock cheaper in the market price, without any change in the company's equity or the value of the equity portfolio of a single shareholder.

As part of the euro introduction many shares of a nominal par value of usually 50 DM pieces with a nominal value of € 5, € 1 or par value shares were converted in Germany. The number of shares in the depot increased without changing the value of the portfolio for those shares.

While a stock split is relatively simple at par value shares by a corresponding amendment possible, all effects must actually be exchanged for a share split at par value shares. In the technical implementation of the existing shares will be retired and replaced by shares with a nominal value lower but the same WKN, ISIN. This is one of the reasons why stock splits were formerly carried out only rarely. By now, most shares are, however, collected in the form of global equities before, so that in a stock split only the few physically present Global shares must be replaced.

Adaptation of historical price data

Normally, a stock split would like the dividend payout a slump result. With a 1:2 stock split (2- for -1; issued ie two new shares are per an old share) would be both the nominal value and the market value halve spontaneously what inexperienced investors could lead to the belief that the course was 50 % broken. Therefore, the historical rates in most major analysis programs are automatically adjusted so that a stock split is not visible in the graph. In most representations of the trading systems the timing of splits, however, are marked. The same applies to the volume of trading, in this example - viewed in the piece - would suddenly double. When working with historical price data, especially exchange rates, trade volume (units ) and trading volume (volume in currency), therefore, is always commanded increased attention in order not to accidentally mix automatic corrections with real data, and thus to calculate unrealistic values ​​.