Why companies split shares

Happy Fin-Friday! The Nvidia stock is now one of the big 3 in the S&P 500. We've talked about Nvidia earnings and how much the stock price has soared just this year. Now they have announced a stock split and a dividend increase from $0.04 per share to $0.10 per share. Let's demystify stock splitting. 🔮

🍰 What Is A Stock Split?

A type of corporate action that changes the cost of a stock.

• Forward split - When a company increases the outstanding shares by issuing new shares to split up the value of each new share. NVDA did a 10 for 1 split (ie - if the stock is $1000 per share it is now $100 per share and everything rebalances everywhere), but companies can also do a 2 for 1, 3 for 1, etc. Say you had a sheet cake cut into 10 squares, but there are more people who want their own piece of cake, so you cut each piece in half and now there are 20 pieces of cake.
• Reverse split - It's the opposite, companies do this to increase the stock price (for example, if the stock price falls below $1)

Why Is Nvidia splitting their stock?

According to their 2024 Stock Split FAQ the stock split isintended to make stock ownership more accessible to employees and investors.

Investor Relations

You can look at the investor relations for any company on their website to see the history of things like how many times they have done a stock split (for example, Nvidia has split their stock 6 times now).

Let us know your questions around stock splitting or any other investing topic. And as always, keep learning, keep earning, and keep breaking barriers!

xoxo,

Fin-Mom & Fin-Auntie

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