Considering the variety of financial metrics available, it's no wonder that investment research can be challenging for the retail investor. Most financial websites offer a chart mode to examine a company's share price over time, usually with accompanying features to identify the cause of certain price movements. One of them is the Stock Split Symbol.
A stock split occurs when a company divides the existing shares by a given multiple. For instance, a 2-to-1 stock split doubles the outstanding shares, a 3-to-1 split triples them and so on. The split doesn't change the market capitalization of the firm since there's been no real change in its value. No equipment or land has been bought, no lucrative contracts won, and no impressive hires made. The nominal share increase is usually offset by a decrease in its price.
The pursuit of liquidity is the main reason companies do stock splits. If its share prices rise too much, it may become too expensive for the average investor. Exclusivity in the market means shares will be bought and sold in large blocks, which exposes the company's stock to greater volatility. The split will, in effect, smooth out the volatility by widening the pool of buyers and sellers.
Imagine an Average Joe investor who owns 10 shares in company XYZ Inc. Each share is worth $100, and there are 5 million shares outstanding, making Joe's total investment $1,000 ($100 x 10 shares). At the same time, the market capitalization of the firm is $500 million ($100 x 5 million shares). The immediate result of a 2-to-1 split is Joe now owns 20 shares out of a total of 10 million outstanding shares. Correspondingly, the share price drops to $50, leaving Joe's total investment and the market capitalization unchanged.
To find the symbol, go to the chart mode of a ticker and select the "Events" filter. An "S" will appear at every point on the graph where a stock split occurred. Hovering the cursor over the "S" will reveal the exact date and type of any stock split.
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