Stock split
A share split (Engl. Forward stock split ) is the conversion of existing shares into a larger number of new shares with a lower nominal value, transaction technically the opposite of a reverse stock split (Engl. Reverse stock split is).
Implementation and peculiarities
A stock split is a measure in which a stock corporation reduces the nominal value of the shares or increases the number of shares issued in order to reduce the price of a listed share and thus make the share easier to trade.
The implementation of a share split must be decided at the general meeting. This measure is actually of a purely psychological nature, as initially nothing changes in terms of participation. The market price of the individual share is cheaper without changing the company's equity or the value of a single shareholder's stock.
As part of the introduction of the euro, many shares in Germany were converted from a nominal value of typically DM 50 to shares with a nominal value of € 5, € 1 or no-par shares . The number of shares in the portfolio increased without changing the portfolio value for these shares.
While a share split is comparatively easy with no- par shares by a corresponding amendment to the articles of association, in a share split with par value shares all effects have to be exchanged. In the technical implementation, the previous shares will be withdrawn and replaced by shares with a lower nominal value but the same WKN or ISIN . This is one of the reasons why stock splits were rarely carried out in the past. Most of the shares are now available in the form of global shares , so that in the event of a share split only the few physical global shares need to be exchanged.
Adjustment of historical course data
Normally, a stock split similar to the dividend payment would result in a price slump. In a 1: 2 share split (2-for-1; i.e. two new shares are issued for each old share), both the nominal value and the market value would suddenly be halved, which could lead inexperienced investors to believe that the price is around 50 % broken into. For this reason, the historical prices are automatically adjusted in most price analysis programs so that a stock split cannot be seen in the graphic. In most of the presentations of the trading systems, however, the times of splits are marked. The same applies to the trading volumes, which in this example - viewed in units - would suddenly double. When working with historical rate data, in particular rate prices, trading volumes (units) and trading volumes (volume in currency), you should therefore always pay close attention to avoid accidentally mixing up automatic corrections with real data and thus calculating unrealistic values.
