A stock split by which each share of a company’s stock is increased on a pro rata basis among all shareholders. As the number of shares increases, the price decreases with the total market value of the outstanding shares being intact. After a company forward splits its stock, investors receive additional shares, while the market price (and par value) per share decreases correspondingly. A forward stock split may be a 2-for-1, a 3-for-1, a 3-for-2, etc. If A and B symbolize the first number and second number respectively, then an investor’s position after an A-for-B split is:
Shares after split = shares x A/B
Price after split = share price x B/A
For example, a company with 1000,000 shares outstanding that executes a two-for-one forward stock split would have 2,000,000 shares outstanding after the forward stock split.
