When a company splits its stock, you end up with more shares, or fewer in a reverse split, at a price adjusted by the same ratio, so your holding is worth the same the morning after as the evening before. The details still matter: open orders, options contracts, dividends per share and cost-basis records all get adjusted, and a reverse split usually means the share price has fallen a long way. The stock investing guide covers the basics of owning shares.
What is a stock split?
A stock split changes the number of shares and adjusts the price per share by the same ratio, leaving the company's market value unchanged. The SEC's example: after a 2-for-1 split, an investor with 100 shares at $100 holds 200 shares at $50, still worth $10,000.
Ratios vary: a 3-for-2 split gives three shares for every two held, and a 10-for-1 split usually arrives as nine additional shares for each one you own. A reverse split combines shares instead; Investor.gov's illustration is a 1-for-10 reverse split that turns 10,000 shares into 1,000.
Why doesn't a split change what your shares are worth?
Because the share count and the price move by the same factor, their product, the value of your position, stays the same, and so does the company's market capitalization.
New shares = old shares × ratio, and new price = old price ÷ ratio
For a 3-for-2 split the ratio is 1.5, and for a 1-for-10 reverse split it is 0.1.
Worked example: A forward and a reverse split worked through
- 3-for-2: 101 shares at $90 = $9,090, which becomes 151.5 shares at $60 = $9,090, or 151 shares plus about $30 if the company pays cash for the half share.
- 1-for-10 reverse: 1,000 shares at $0.80 = $800, which becomes 100 shares at $8.00 = $800.
Sandisk's investor FAQ for its 2026 split gives a real-price version: 100 shares at $1,260 become 800 shares at $157.50, both worth $126,000.
Dividends follow the same rule. The SEC notes that a split cuts the dividend per share proportionately, so total payments do not change: NVIDIA's $0.10 quarterly dividend became $0.01 a share after its June 2024 split, so 10 shares earning $1.00 a quarter turned into 100 shares earning the same $1.00. The market price can still move on split day for other reasons, such as earnings news; the split only rescales it.
Why do companies split their stock?
Companies usually say a lower share price makes the stock easier for employees and individual investors to own, especially after the price climbs into the thousands. Netflix was explicit: its October 2025 announcement said the 10-for-1 split would reset the share price to a range more accessible to employees in its stock option program.
Other practical effects:
- Options contract size. A standard listed option covers 100 shares, so on a $1,000 stock one contract controls $100,000 of stock. A split brings that down to a more common size.
- Price-weighted indexes. In the Dow Jones Industrial Average a company's weight depends on its share price, so a split shrinks its weight, and S&P Dow Jones Indices adjusts the index divisor so the level does not jump. Market-value-weighted indexes such as the S&P 500 need no divisor change; Dow Jones vs S&P 500 vs Nasdaq explains the difference.
The accessibility argument has weakened now that many brokerages sell slices of high-priced shares by the dollar, as fractional shares explains. None of these reasons changes a company's earnings or prospects.
Recent large stock splits
Dates for these forward splits come from each company's SEC filings and investor-relations releases.
| Company | Ratio | Announced | First split-adjusted trading day | Detail |
|---|---|---|---|---|
| NVIDIA | 10-for-1 | May 22, 2024 | June 10, 2024 | Record date June 6; shares credited after the close on June 7 |
| Netflix | 10-for-1 | October 30, 2025 | November 17, 2025 | Record date November 10; shares credited after the close on November 14 |
| ServiceNow | 5-for-1 | December 5, 2025 (shareholder approval) | December 18, 2025 | Record date December 16; four additional shares per share |
| Booking Holdings | 25-for-1 | February 18, 2026 | April 6, 2026 | Record date March 6; shares credited after the close on April 2 |
| KLA | 10-for-1 | May 7, 2026 | June 12, 2026 | Record date June 4; dividend expected to go from $2.30 to $0.23 a share |
| Sandisk | 8-for-1 | October 29, 2026 | November 20, 2026 (scheduled) | Record date November 9; effective after the close on November 19 |
Holidays can stretch the calendar: April 3, 2026 was Good Friday, when US exchanges were closed, so Booking's split-adjusted trading began on Monday, April 6.
When you compare prices across a split date, check that the history is split-adjusted, meaning older prices have been divided by the ratio. The NVIDIA stock page and the stock prices dashboard show current quotes.
How does a stock split happen, step by step?
A split moves through approval, an announcement, a record date, the distribution of new shares and a first day of trading at the new price.
- Approval. The board approves the split, and depending on state law and the charter, shareholders may vote too. ServiceNow held a shareholder vote in December 2025, while Booking Holdings and Sandisk said Delaware law let their boards act alone.
- Notice. SEC Rule 10b-17 requires the company to give notice of a split no later than 10 days before the record date, including how any fractional interests will be settled.
- Record date. Shareholders of record on this date are entitled to the new shares.
- Distribution. The new shares are credited, often after the close on the payable date.
- Ex-date. For splits of 25% or more, FINRA Rule 11140 sets the ex-date as the first business day after the payable date, which is why NVIDIA began trading at split-adjusted prices on Monday, June 10, 2024.
Between the record date and the ex-date, shares trade with a due bill, so if you sell in that window the new shares go to the buyer, as Sandisk's FAQ notes. Afterward the company reports the split's effect on basis on IRS Form 8937, filed with the IRS or posted on its website.
What happens to open orders and options in a split?
For a forward split, brokers cut the price and raise the size of open buy orders and sell stop orders; in a reverse split, pending orders are cancelled. Under FINRA Rule 5330, the dollar value of the split is rounded up to the next price increment and subtracted from the order price on the ex-date, and unless the order is marked do not increase, the share quantity is multiplied by the ratio and rounded down to a whole share.
Worked example: A buy limit order through a 3-for-2 split
You have a good-'til-canceled order to buy 101 shares at a $100 limit.
- Split-adjusted equivalent: $100 × 2 ÷ 3 = $66.6667, so the split is worth $33.3333 a share
- Rounded up to the next cent: $33.34
- New limit price: $100 − $33.34 = $66.66
- New size: 101 × 3 ÷ 2 = 151.5, rounded down to 151 shares
Sell limit orders and buy stop orders are not adjusted, but the broker must promptly tell you about the split, and firms may apply stricter policies of their own, so recheck every open order afterward. Stock order types explains each kind of order.
Listed options are adjusted so each position keeps the same overall terms. The Options Clearing Corporation's disclosure document describes the usual approach:
- Whole-number splits such as 2-for-1 or 10-for-1 usually mean more contracts at a lower strike. One call with a $500 strike becomes ten calls with a $50 strike after a 10-for-1 split, each still covering 100 shares.
- Other ratios such as 3-for-2 usually keep the number of contracts and the strike, but each contract delivers 150 shares instead of 100.
- Reverse splits usually keep the number of contracts and the strike but shrink the deliverable. After a 1-for-10 reverse split, a contract delivers 10 shares, and exercising it costs the same total amount as before.
- Fractional shares that would be delivered are generally replaced by cash.
Check the deliverable before trading an adjusted contract. Options basics explains contracts and strikes.
How does a split change your cost basis?
Your total basis stays the same and is spread across the new share count, and the holding period of the original shares carries over to the new ones. IRS Publication 550 gives the pattern: if one share with a $45 basis becomes three shares in a split, each new share has a $15 basis.
Worked example: Basis after a 10-for-1 split
- You bought 100 shares at $150 in 2023, for $15,000. After a 10-for-1 split you hold 1,000 shares with a $15 basis each, still $15,000 in total, and they keep the 2023 purchase date.
- Selling 400 of them at $22 produces a gain of 400 × ($22 − $15) = $2,800, long-term because the holding period dates from 2023.
Each lot bought at a different time is divided separately, which matters if you reinvest dividends; dividend reinvestment covers those records. Shares received in a split of a covered security stay covered, so the broker keeps reporting their basis, and cash for a fractional share is reported as a sale on Form 8949. Capital gains tax on stocks explains the rates.
How do reverse splits and listing rules work?
A reverse split cuts the share count and raises the price by the same ratio, usually to keep a stock above an exchange's $1 minimum price. Investor.gov warns that the price can fall again after the split.
In January 2025 the SEC approved changes at both Nasdaq and the NYSE that take away the cure period from a company that did a reverse split in the prior year. The main price rules now compare like this:
| Rule | Nasdaq | NYSE |
|---|---|---|
| When a company falls out of compliance | Bid price below $1 for 30 consecutive business days | Average closing price below $1 over 30 consecutive trading days |
| Time to fix it | 180 calendar days, needing a closing bid of $1 or more for at least 10 consecutive business days | Six months, after telling the NYSE within 10 business days that it intends to cure |
| No cure period if the company already did | A reverse split in the prior year, or reverse splits totaling 250-to-1 or more over two years | A reverse split in the prior year, or reverse splits totaling 200-to-1 or more over two years |
| Other limits | A delisting decision if the closing bid is $0.10 or less for 10 consecutive trading days | A reverse split cannot leave the company below the NYSE's minimums for shareholders or publicly held shares |
Nasdaq also requires at least 10 calendar days' notice to the exchange and a public announcement at least two business days before a reverse split takes effect. When shareholders must approve one, the company files a proxy statement on Schedule 14A, and a reverse split meant to cash out enough small holders to take the company private requires a Schedule 13E-3 filing.
Worked example: A 1-for-20 reverse split
You own 150 shares at $0.60, worth $90.
- After the split: 150 ÷ 20 = 7.5 shares at $0.60 × 20 = $12.00, still $90
- If fractions are paid in cash: 7 shares worth $84, plus about $6 for the half share, a taxable sale of that fraction
- Under the same cash-for-fractions policy, a holder of fewer than 20 shares would be left with only cash
What are the risks around stock splits?
The split itself is neutral, but it can encourage costly decisions, trading errors and tax mistakes.
- The cheap-price illusion. A $100 share after a 10-for-1 split is no cheaper than a $1,000 share before it. Valuation depends on price relative to earnings, which the P/E ratio measures, not on the price of one share.
- Announcement hype. Buying because a split was announced is a bet on short-term sentiment, not on the business.
- Reverse-split warning signs. A reverse split often follows a long price decline and does not fix whatever caused it, and the price may keep falling.
- Order and option surprises. Unadjusted sell limits, orders cancelled by a reverse split and nonstandard option deliverables can all lead to trades you did not intend.
- Wrong basis data. If a lot's basis is not divided by the ratio, a later sale can show a large false gain or loss, so check your broker's lot records after any split.
A split changes nothing for a fixed-dollar monthly plan: $100 still buys $100 of stock, just as more shares at a lower price, and the DCA calculator shows how such a plan adds up. For the wider set of risks that do change what a holding is worth, see types of investment risk.