Definition
A company dividing each existing share into several, cutting the price per share proportionally. Your total value does not change; you simply hold more shares at a lower price, and your cost basis per share divides by the same ratio.
Why it matters
Splits feel like an event but change nothing fundamental: no value is created or lost. Knowing that keeps you from buying a stock because it suddenly looks cheap, and keeps your basis math right when you eventually sell.
Example
An investor holds 100 shares at $300, worth $30,000. After a 4-for-1 split they hold 400 shares at $75: still $30,000. Their $200-per-share cost basis becomes $50 per share, so the taxable gain on a future sale is identical.
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.