Like an oversized piece of cake, a stock with an expensive price tag can be tough for investors to swallow. While fractional shares help to some extent, high-priced stocks often face psychological barriers. To address this, many companies pursue stock splits. What Are Stock Splits? A stock split occurs when a company issues additional shares to its existing shareholders, which proportionately reduces the company’s share price. Companies usually announce an upcoming stock split along with its effective date. Once a split takes place, shareholder accounts will reflect the new share count and price adjustment. For example, let’s assume you own 100 shares of a stock that’s worth $500 per share; if the company declares a 2-for-1 stock split, your share count would double to 200 shares while the share price would halve to $250 per share. The total value of your holdings remains $50,000. The most common stock splits are 2-for-1, 3-for-2, and 3-for-1. Occasionally though, highly priced stocks undergo larger splits, such as Chipotle’s notable 50:1 split in June 2024, one of the biggest on record. Stock splits aren’t reserved for mega-cap enterprises or