NYCJames
commented on
Stock splits confused some investors.
It's natural to think doubling the shares will double your money, but that's not true.
When a company splits its stock, its market capitalization remains unchanged.
Assume a company has 10 million shares in total trading for $50 each.
Its market capitalization is $500 million (10 million shares X $50 share price).
The company chooses to do a 2-for-1 stock split, which doubles the amount of shares.
That would cause the price of th...
It's natural to think doubling the shares will double your money, but that's not true.
When a company splits its stock, its market capitalization remains unchanged.
Assume a company has 10 million shares in total trading for $50 each.
Its market capitalization is $500 million (10 million shares X $50 share price).
The company chooses to do a 2-for-1 stock split, which doubles the amount of shares.
That would cause the price of th...
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10
NYCJames : Excuse me, if 10 million shares are 50 US dollars each, shouldn't the total value be 500 million? Why 50 million dollars?