How Stock Splits Work and Why Companies Do Them

A stock split changes how many shares a company has and the price of each one, but not what the company is worth: after a 2-for-1 split, a holder of 100 shares at $100 owns 200 shares at about $50. Amphenol (APH) completed a 2-for-1 split in September 2026, and its third-quarter earnings guidance was halved from $1.40-$1.42 to $0.70-$0.71 per share to match ^[1]^[2]. A reverse split does the opposite: DuPont (DD) combined every three shares into one on June 24, 2026, cutting its share count from about 405 million to about 135 million ^[3]. Companies split to change the price per share, usually to make shares easier to buy or, in a reverse split, to lift a low price.

How does a stock split work?

The board approves a ratio, sets a record date and a distribution date, and the exchange starts quoting the stock on a "split-adjusted" basis. Amphenol's timetable is typical ^[2]:

August 5, 2026: the board approved a two-for-one split, paid as a stock dividend.
August 17, 2026: the record date. Each holder at the close of business received one additional share for each share held.
September 2, 2026: the additional shares were expected to be distributed. DataPorium's price history records the split on September 3, the first day of split-adjusted trading ^[1].

Everything measured per share is divided by the same ratio. Amphenol's quarterly dividend of $0.25 became $0.125 per share after the split, and its earnings guidance was halved ^[2]. Market value, total dividends paid and each holder's percentage of the company do not change. Option contracts, employee stock awards and convertible securities are adjusted by the same ratio.

The arithmetic

Before and after	Shares held	Price per share	Value of the holding
Before a 2-for-1 split	100	$100	$10,000
After a 2-for-1 split	200	$50	$10,000
Before a 1-for-3 reverse split	300	$40	$12,000
After a 1-for-3 reverse split	100	$120	$12,000

Illustrative numbers. When a reverse split would leave a holder with a fraction of a share, the company pays cash instead; DuPont said its transfer agent would make those payments ^[3].

Why do companies split their stock?

A split is cosmetic for the company's value, but it can matter for who buys the stock. The reasons companies give are usually about access:

Affordability for small investors and employees. Nvidia (NVDA) announced its 10-for-1 split in May 2024 "to make stock ownership more accessible to employees and investors" ^[5].
Trading in round lots and options. One listed option contract usually covers 100 shares, so a lower price makes contracts cheaper to trade.
Signaling. Boards rarely split a stock they expect to fall, so a split can be read as management confidence.

Fractional-share trading at many brokers has weakened the affordability argument, yet large splits continued. Recent examples, from DataPorium's split histories:

Company	Ratio	First split-adjusted trading day	Close on October 9, 2026
Walmart (WMT)	3-for-1	February 26, 2024	$111.35
Nvidia (NVDA)	10-for-1	June 10, 2024	$229.28
Chipotle Mexican Grill (CMG)	50-for-1	June 26, 2024	$31.59
Broadcom (AVGO)	10-for-1	July 15, 2024	$361.54
DuPont (DD)	1-for-3 (reverse)	June 24, 2026	$130.00
Amphenol (APH)	2-for-1	September 3, 2026	$87.24

Source: DataPorium stock pages, split history and daily closes ^[1]^[4]^[6]^[7]^[8]^[9].

Do stock splits increase a stock's value?

Not mechanically: the split itself creates no value. The question is whether split announcements carry information. The best-known study, by David Ikenberry, Graeme Rankine and Earl Stice, looked at 1,275 two-for-one splits and found an average excess return of 3.38% on the announcement, followed by excess returns of 7.93% in the first year and 12.15% over three years ^[10]. The authors read that as the market underreacting to a positive signal from management, not as an effect of the split itself ^[10].

Later research disagrees about how to measure long-run returns, and the sample ends decades ago. A split is better read as a statement of confidence from the board than as a reason for a stock to rise.

A split changes the number of slices, not the size of the pie: market value, dividends paid and each holder's share of the company stay the same.

What is a reverse stock split, and why does it happen?

A reverse split combines shares to raise the price per share. Most reverse splits come from companies whose stock has fallen far, because exchanges require a minimum price. On Nasdaq, a stock that closes below $1.00 for 30 consecutive business days is out of compliance and generally has 180 days to recover, with a possible second 180-day period ^[11]. A reverse split is the usual cure.

The rules tightened in 2025. Under a Nasdaq amendment approved by the Securities and Exchange Commission on January 17, 2025, a company that falls below $1.00 again within a year of a reverse split gets no compliance period at all ^[11]. The change targets companies that used repeated reverse splits to stay listed.

Not every reverse split is a distress signal

Healthy companies sometimes reverse split after a breakup or to bring the share count in line with peers. DuPont's 1-for-3 reverse split was approved by stockholders at its May 21, 2026 annual meeting, and the company reaffirmed its 2026 financial guidance in the same announcement ^[3]. Its stock closed at $130.00 on October 9, 2026 ^[9]. Context, not the ratio, separates a housekeeping reverse split from a rescue.

What should a shareholder check?

Nothing to do in most cases. Shares held at a broker are adjusted automatically; DuPont said book-entry holdings would be adjusted without action ^[3].
Cost basis. The total cost basis stays the same and is spread over the new number of shares; a 2-for-1 split halves the cost per share.
Charts and history. Price histories are adjusted backward for splits, so a chart shows Nvidia's prices from before June 10, 2024 divided by 10, not the prices that actually traded ^[4].
Limit orders and options. Open orders may be canceled or adjusted, and option contracts change their share count or strike.
Price-weighted indexes. In the Dow Jones Industrial Average, which weights members by share price, a split reduces the company's weight in the index.

Key takeaways

A split changes share count and price per share, not value: Amphenol's 2-for-1 split halved its third-quarter EPS guidance to $0.70-$0.71 ^[2].
Reverse splits combine shares: DuPont's 1-for-3 split on June 24, 2026 cut its share count from about 405 million to about 135 million ^[3].
Large splits continued despite fractional shares: Chipotle split 50-for-1 and Nvidia 10-for-1 in 2024 ^[4]^[7].
A classic study of 1,275 two-for-one splits found 7.93% excess returns in the year after the split, attributed to signaling, not the split itself ^[10].
On Nasdaq, 30 business days below $1.00 starts a 180-day compliance clock; since January 2025, a recent reverse split removes it ^[11].

Frequently asked questions

Is a stock split good or bad for shareholders?

Neither by itself: the value of a holding does not change. Research found that two-for-one split announcements were followed by positive excess returns on average, 7.93% in the first year in a sample of 1,275 splits, which the authors linked to management's confidence ^[10].

What happens to my shares in a stock split?

Your broker adds shares and lowers the price per share by the split ratio. Amphenol holders of record on August 17, 2026 received one additional share for each share held ^[2].

Why would a company do a reverse stock split?

Usually to lift a share price that has fallen below an exchange minimum, such as Nasdaq's $1.00, or to reduce a very large share count after a restructuring. DuPont's 1-for-3 reverse split took effect on June 24, 2026 ^[3]^[11].

Do stock splits affect dividends?

The dividend per share is divided by the split ratio, so the total paid is unchanged. Amphenol's $0.25 quarterly dividend became $0.125 per share after its 2-for-1 split ^[2].