A:

The short answer is that a stock split will have little effect on the holder of stock certificates. In most cases when an investor purchases shares in a company, they are never actually held in paper form by the investor or the investor's brokerage firm. Instead, the shares of a company are held in electronic form and registered with the company's transfer agent. However, investors do have the right to obtain the shares in paper form, referred to as stock certificates. If your shares are held in paper form, you will still be registered as the holder of record with the transfer agent.

When a stock splits, it essentially means that the company is increasing the amount of shares in the company. You, as the holder of stock certificates, will continue to hold your certificates. At the time of the split, the company's transfer agent will add the split-adjusted shares to its records. These additional shares will be in electronic form on the transfer agent's books, and stock certificates will generally not be issued at the time of the split. For example, if a company instituted a 2-for-1 stock split, it would mean that for every one share you hold in the company now, you would receive an additional share. If you held 100 shares prior to the split, you would own 200 shares after the split. (But don't get too excited: the price per share will be cut in half, evening everything out.) If those 100 shares were held as stock certificates, you would retain those shares and not be required to return the certificates. Your additional 100 shares in the company would simply be registered to you by the transfer agent. In other words, you would hold 100 stock certificates and 100 shares would be held in electronic form by the transfer agent. If you wanted to receive the additional 100 shares in paper form, you would just need to ask the transfer agent to send you stock certificates.

The only thing that happens to your stock certificates in the event of a stock split is that each individual certificate becomes worth less than before, but you gain additional shares that are given to you in electronic form. There's no need to send your certificates back or rip them in half to sell them. Companies tend to make stock splits as easy on investors as possible.

(To learn more about stock splits and stock certificates, read Understanding Stock Splits and Old Stock Certificates: Lost Treasure or Wallpaper?.)

RELATED FAQS
  1. What are some of the disadvantages to taking venture capital?

    Learn how financing a business through venture capital can be a viable source of funding for small businesses but know caveats ... Read Answer >>
  2. Is the upfront cost of Class A mutual fund shares worth it?

    Learn about the differences between mutual fund share classes, and discover under what circumstances the Class A shares make ... Read Answer >>
  3. How does correlation affect the stock market?

    Learn about the role correlation plays in prudent stock market investing, and how the correlation coefficient is used to ... Read Answer >>
  4. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Answer >>
  5. What is the 'Rule of 72'?

    The 'Rule of 72' is a simplified way to determine how long an investment will take to double, given a fixed annual rate of ... Read Answer >>
  6. What is a stock split? Why do stocks split?

    All publicly-traded companies have a set number of shares that are outstanding on the stock market. A stock split is a decision ... Read Answer >>
Related Articles
  1. Fundamental Analysis

    Calculating The Gain Or Loss On An Investment

    Calculating the percentage of change in an investment is easy. Take the amount the investment gains and divide it by the amount invested.
  2. Active Trading Fundamentals

    What Does Bid And Asked Mean?

    Bid and asked is a two-way price quotation.
  3. Investing Basics

    I Want To Start Buying Stocks: Where Do I Start?

    To buy stocks, you need the assistance of a licensed stockbroker. Today, there are four basic types.
  4. Markets

    How To Analyze A Company's Financial Position

    Find out how to calculate important ratios and compare them to market value.
  5. Investing Basics

    Ten Worst Mistakes Beginner Investors Make

    Avoiding these ten mistakes can help you steer clear of the most common ways investors lose their money.
  6. Term

    The Annual Report Is a Public Company's Obligation

    The annual report is a yearly publication that public corporations provide to shareholders to describe the company’s operations and financial condition.
  7. Fundamental Analysis

    4 Investment Ratios That Can Help You Make Money

    You can learn a lot about an investment’s possibilities by reading the corporation’s financial statements. But it also helps to be familiar with some basic investing ratios.
  8. Investing News

    Bill Ackman's Success Story: Net Worth, Education & Top Quotes (HLF, JCP)

    Read about William Ackman, Pershing Square Capital Management's confident and brash portfolio manager and famous activist investor.
  9. Investing Basics

    The Impact Of Share Repurchases

    Share repurchases can impact investors and companies in different ways.
  10. Investing Basics

    Explaining Average Daily Trading Volume (ADTV)

    Average daily trading volume represents the average number of individual securities traded in a day or over a period of time.
RELATED TERMS
  1. Ethical Investing

    Using one's ethical principles as the main filter for securities ...
  2. Board Of Directors - B Of D

    A group of individuals that are elected as, or elected to act ...
  3. Series EE Bond

    A non-marketable, interest-bearing U.S. government savings bond ...
  4. Brand

    A distinguishing symbol, mark, logo, name, word, sentence or ...
  5. Markdown

    The difference between the highest current bid price among dealers ...
  6. Catalyst

    A catalyst in equity markets is a revelation or event that propels ...

You May Also Like

Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center