## Stock Split
### Meaning
A stock split is a corporate action that divides existing shares into a greater number of lower-priced shares. The total equity value and company fundamentals do not change — only the number of shares and the face value per share change.
Example: One share of ₹500 face value in a 5:1 split → 5 shares of ₹100 each.
> A shareholder's proportional ownership and total wealth remain unchanged immediately after the split.
### Why Companies Use Stock Splits
- When share prices rise too high (e.g., ₹1,000+), they become less accessible to retail investors.
- A split brings the price per share down to a more tradable range, improving market liquidity and investor participation.
### Advantages
| Advantage | Explanation |
|---|---|
| Affordability for small investors | Lower price per share enables retail participation |
| Increased shareholder base | More accessible shares may attract a larger investor community |
| Improved market liquidity | Higher number of shares in circulation facilitates easier trading |
### Limitations
| Limitation | Explanation |
|---|---|
| Additional expenditure | Administrative and regulatory costs are incurred to execute the split |
| Attracts speculators | Lower prices may draw short-term traders rather than long-term investors |