A stock split occurs when a company increases the number of its shares outstanding by issuing more shares to current shareholders. This reduces the price of each individual share while maintaining the overall market capitalization of the company. For instance, a 2-for-1 split would double the number of shares each investor holds, effectively halving the price of each share.
Stock splits can be viewed positively by investors. A lower per-share price can make the stock more accessible to a broader range of investors, potentially increasing demand. Historically, companies have utilized stock splits to signal confidence in their future prospects, often accompanying periods of strong growth and profitability. Increased liquidity can also result from a larger number of outstanding shares trading in the market.