Stock-exchange glossary

A stock split occurs when the par value of a share is split (or combined) but the capital stock and the total value of the shares remain unchanged. 1:2 and 1:10 splits are the most common. The number of shares is increased but the value of the individual share is lower. This enables a price to be reduced to an optimum level to stimulate demand and make it attractive to small investors. Shares are sometimes combined to make them "more expensive" and in this case the value of a share is increased and the number of shares circulating is reduced. Stock corporations often use this means of "upvaluing" their shares when they appear too cheap.