Does the news of a pending stock split have any effect on the price of the stock?

We haven’t been able to discern any consistent or reliable reaction that a stock has to a pending stock split. However, I would note that a stock with an excessive number of stock splits within a relatively short period of time, or a number of large splits such as 3-for-1 or larger should be checked for signs of topping. Often, this occurs after a stock has had a large upward move. A stock split does not fundamentally impact the company in terms of earnings per share and a host of other fundamental measurements. However, companies will often split their shares in order to bring down the price of the stock as a way of making it more appealing and/or accessible to investors. Also, splitting the stock will increase the float, which may make it more accessible to institutional investors.

One Reply to “Does the news of a pending stock split have any effect on the price of the stock?”

  1. Apart from that, when the new shares (after bonus or split) is received, they are considered as purchased at 0 price on the date of receipt for taxation purpose.
    So, while I bought 100 shares at ₹1000, I will now have 200 shares (2 for 1 split) trading at perhaps ₹700. Now, if i sell 100 shares, it is considered as the 1st 100 shares that I purchased at 1000. And since I will be selling at 700, it will be seen as a loss and hence doesn’t attract income tax. Due to this effect also the share price reduces after a split at times…

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