A stock split increases the total number of available shares in a publicly traded company. However, as the number of available shares changes, the market capitalization of the company remains the same. This means that there is no share price dilution. The Stock Split Calculator lets you calculate how a stock split will affect the shares you currently hold.
To calculate the new share price of the stocks you hold, you’ll need three pieces of information:
- The number of shares owned before the split
- The current share price
- The split ratio (2:1, 3:1, etc.)
You can automatically populate the current share price by using the search function within the calculator. When you choose a stock from the list, the calculator will also let you know whether any upcoming or recent stock splits apply.
The new share price will be calculated by multiplying the original share price by the stock split ratio.
Stock Split Calculation Example
On June 6, 2022, Amazon (NASDAQ:AMZN) issued a 20:1 stock split. The company’s share price the day before the split was approximately $2,400. So when shares began to trade the day after the split, the new share price was $120.
If an investor owned 100 shares of Amazon before the split, those shares would have been valued at $240,000. After the split, the investor would now own 2,000 shares of AMZN stock. However each share would be worth $120 so the total equity of the investor remains at $240,000.
Calculating Reverse Stock Splits
Investors can also use the Stock Split Calculator to calculate what happens to their shares in a reverse stock split. In a reverse stock split, the number of outstanding shares decreases and the price per share increases.
Here’s an example: Company ABC has 8 million outstanding shares valued at $2.50 a share and a market capitalization of $20 million. The company issues a 1:2 split. This decreases its outstanding shares from 8 million to 4 million and increases the value of those shares to $5.00. Therefore, just as with a stock split, the market capitalization remains unchanged.
If an investor previously owned 500 shares at $2.50, they would now own 250 shares at $5.00 per share. But the intrinsic value of that asset in their portfolio would still be $1,250.
