What is a Split and anti-split?

Split or split in Spanish, is an operation that is to reduce the price of a certain action by an integer factor, thus increasing the amount of shares issued by the same factor, with the aim of reducing its price to make it more attractive to small investors, creating greater liquidity for action and in turn reduce its spread, the difference between the purchase price and selling stocks.

For example, if you have a company that has 10.000 shares with a par value of $ 900 and the company makes a Split de1 to 9, the new share price would be $ 100, and the number of shares outstanding would 90,000 now. Considering that the cost of 1 action was $ 900 and after the Split 9 shares worth $ 100 each, one can conclude that this procedure which for many is called a psychological strategy is simply a system that facilitates the negotiation of the shares the company to carry potential liquidity necessary, without affecting the total market value of the company.

Conversely, anti-split is the operation that reduces the number of shares, multiplying by a definite factor and providing higher nominal value. Although not a conventional system on the market, tend to apply certain companies that own shares whose value is usually below $ 5. That is, if the value 1 action of a certain company is $ 3 and a counter-split 10 applies the number of shares issued by the company by a factor of 10 is decreased while the new share price will 30 Dollars.

One thought on "What is a Split and anti-split?"

Leave a comment

Your email address will not be published. Required fields are marked *