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Stock Splits

Understanding stock splits

Stock splits are a unique opportunity in the market that don't come around every day. Learn more about how stock splits can affect your portfolio and investing plans.

What is a stock split

A stock split is a type of corporate action that occurs when a company's board of directors decides to divide the company's outstanding shares into a larger or smaller number of shares. Splits are a change in the number of outstanding shares of a company’s stock without a change in shareholders' ownership percentage in the company. For example, with a 2:1 split, a client will receive 2 shares for each share owned prior to and through the open on the security's split ex-dividend (or “effective”) date.

There are two types of stock splits:

Forward splits are the division of the outstanding shares of a corporation into a larger number of shares. For example, in a three-for-one stock split (3:1), each old share is now equal to three shares. The price per share would also go down. In this example, if the pre-split share was worth $9, the post-split share would be worth $3. Usually, splits must be voted by directors and approved by shareholders.


Reverse splits 
are a reduction in the number of outstanding shares. For example, if you had 300 shares of XYZ and there was a one-to-three reverse split (1:3), your old 300 shares would now be equal to 100 shares. The price of each new share would also be worth more. If the pre-split share was worth $2, the post-split share would be worth $6.

When you hold a short position on a stock that has a forward split, the shares will be debited from (NOT credited to) your account. Essentially, your short position is increased due to the split.

Why choose TD Ameritrade for stock trading

  • No subscription or platform fees - Get access to any of our trading platforms, streaming news, and expert research without an additional fee. 
  • Intelligent order routing - Enter stock orders knowing that we're committed to route your order quickly to pursue execution at the best available price.
  • Powerful stock trading platforms - Use our Investing Web Platforms or thinkorswim Trading Platforms to help you reach your full trading potential.
  • Free independent research - Gain market insight and ideas from third-party market gurus at Morningstar, CFRA (formerly S&P Capital IQ) and Marketedge®.

Learn more about stock splits

Get in touch Call or visit a branch

Call us: 800-454-9272

175+ Branches Nationwide

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