Stock Split

 

 

What Is A Stock Split?

All QSE’s listed companies have a set number of shares that are outstanding. A stock split is an increase in the number of shares that are outstanding by 10 times to the current shareholders at a lower nominal value (nominal value from QR 10 to QR 1).

Example:

Before the stock split:

Number of shares: (20) shares
Share market price: QR (10)
Total shares value: QR (200)

After the stock split:

Number of shares: (200) shares
Share market price: QR (1)
Total shares value: QR (200)

The Stock split neither have impact on the shareholder’s equity nor on the total value of the investor’s shares.

 

Why Do Stocks Split?

  • The main purpose is to make share prices look more affordable to retail/individual investors even though the total market value of the company and the investor’s portfolio have not changed.
  • Expansion of the ownership base of listed companies as a result of the entry of new investors, who prefer to trade low-priced stocks.
  • Increase the number of shares available for trading. This has the positive effect of increasing liquidity in the stock market.
 

Does stock split have an effect on the ownerships?

No, there will not be any effect at all, but the stock split will increase the investor's number of shares by 10 times with the total value of these shares remain unchanged.
For example, if you own 100 shares in a certain company that is trading at QR 10 per share, the total value of these shares is QR 1,000. After the stock split, the number of shares will increase to 1,000 shares and the price will immediately decrease to become QR 1 per share with the total value of these shares remain unchanged at QR 1,000.
 

Conclusion

A stock split is used mainly when share prices increase substantially and while the number of outstanding shares increases and price per share decreases, the companies’ market capitalization (and the value of the investors’ portfolios) do not change. As a result, stock splits help make shares more affordable to retail and individual investors and provides higher liquidity in the stock market.

 

 

  Click here to view Stock Split Timetable


 

 

Click here to view a Video on Stock Split