All the big and small investors in the stock market try to earn profits by investing money. On the other hand, it is very difficult for new people to earn through this. Some share holders even become paupers after investing in it. Actually this happens when some companies go into loss. On the other hand, the existing shareholders keep holding the stocks with them. Only when the right time comes, they are able to earn profits through it. Before investing in it, definitely know about stock split.
what is a stock split
Stock split is a very simple term. Shareholders usually hold different stocks with themselves. On the other hand, some companies start reducing the price of shares when adverse times come. New investors then buy the stock. On the other hand, stock split is used so that the old shareholders are not harmed. Through this, the old shareholders do not go into loss even after the reduction in its value.
How shareholders can take advantage of stock split
Companies allot a certain amount of shares to the old shareholders who already own the stock. Usually this happens when its price is low. So the question arises that how will the old shareholders benefit? Actually, as soon as its price is cut, new investors start buying it. It does not affect the old shareholders. After this, both the people earn profits when the price of the stocks increases.
Who is eligible for stock split
Only companies determine who is eligible for a stock split once the per share price is low. Those people are eligible for this who have bought it a day or 2 days back. That means those who buy the shares on the day of split will not get the benefit. Not only this, after going profitable, many times companies can also take back the stock using reverse split.