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. Is this stock certificate worthless?

    I bought 50,000 shares of restricted common stock from a company in December 2015 and received a stock certificate. I then ... Read Answer >>
  2. How and why does a stock split?

    Learn why stock splits do not occur very often for individual stocks, and understand the impact of reverse stock splits on ... Read Answer >>
  3. I lost my share certificate. Do I still own the stock?

    Regardless of whether a shareholder loses his or her stock certificate, that person still owns the shares. However, in order ... Read Answer >>
  4. How do you get a hard copy of a stock certificate?

    Before online brokers and personally-directed accounts, holding a physical stock certificate was a necessity, as this was ... Read Answer >>
  5. Does a stock split lead to the gapping up/down of the stock?

    If a company splits its stock, there will be no gapping of the stock due to the split itself. A stock split does not materially ... 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. Investing

    Understanding Stock Splits

    We explain what they are, the thinking behind them as well as their results.
  2. Investing

    Old Stock Certificates: Lost Treasure Or Wallpaper?

    What if you've discovered some old shares in bearer form? Follow our tips and find out what they're worth.
  3. Investing

    Stock Splits: A Closer Look At Its Effects

    Most trades, including short sales and options, aren't materially affected by a stock split. Still, it's important for shareholders to understand how these events impact various aspects of investing. ...
  4. Investing

    If You Had Invested Right After Amazon's IPO

    Find out how much you would have made if you had invested $1,000 during Amazon's IPO, including how the power of the stock split affects investment growth.
  5. Investing

    What Are Corporate Actions?

    Corporate actions are processes that change a company’s stock. Here are a few examples.
  6. Investing

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  7. Markets

    Do Stock Splits Cause Volatility?

    Since stock splits decrease the stock price, do they also increase volatility because shares are traded in smaller increments? Investopedia examines assumptions about this increasingly common ...
  8. Investing

    Old Stock Certificates: Lost Treasure?

    Today, most stocks reside electronically in a broker’s computer. But it is possible to stumble across a physical stock certificate.
  9. ETFs & Mutual Funds

    What Does a Transfer Agent Do?

    Transfer agents maintain the records and documents related to shareholder accounts.
  10. Investing

    Should Chipotle Consider a Stock Split? (CMG)

    Learn why it might be good for Chipotle to enact a stock split. Discover why some investors are bearish on the company's prospects.
RELATED TERMS
  1. Push Out

    One of two ways to effect a stock split. In a push out, new share ...
  2. Transfer Agent

    A trust company, bank or similar financial institution assigned ...
  3. Split Adjusted

    A modification made to a security's price that takes into consideration ...
  4. Cage

    A term used to describe the department of a brokerage firm that ...
  5. Stock Power

    A legal power of attorney form that transfers the ownership of ...
  6. Trust Certificate

    A bond or debt investment, usually in a public corporation, that ...
Hot Definitions
  1. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  2. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  3. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  4. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  5. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  6. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
Trading Center