What is the Definition of a 3 for 1 Stock Split?

By Neil Kokemuller, eHow Contributor

A 3-for-1 stock split occurs when a company’s board elects to split each outstanding common share of stock into three. The net result is three times as many shares, each worth a third of their pre-split price.

  1. Basics

    • Stock splits can be performed by virtually any multiple a company chooses. In a 3-for-1 split, if a company begins with 100,000 outstanding shares at $30 each, the result is 300,000 shares worth $10 each. The total value of all shares remains the same.

    Considerations

    • Companies perform stock splits for a variety of reasons. Some perform stock splits when shares are struggling to avoid delisting on major stock indexes and to meet exchange requirements. Others split stocks to reduce the purchase price of each share.

    Benefits

    • Reducing the per-share price makes your stock more appealing to smaller-money investors who may not see benefit in buying a small number of high-priced stocks. In theory, greater market demand should help boost share value. Most immediate benefits of a stock split are psychological, however, since the net worth of shares remains the same.

Read more: What is the Definition of a 3 for 1 Stock Split? | eHow.com http://www.ehow.com/facts_7216029_definition-3-1-stock-split_.html#ixzz23SoSpEBF

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