How to Split Stock in California
Stock splits are a way to make high-priced shares more attractive to small investors. When a company splits its stock two for one, for example, investors who own 5,000 shares then own 10,000 shares, each worth half the original price. Current stockholders retain the same ownership, but new investors may see the stock as a better investment at the lower price. Stocks can be split any way the company chooses, such as two shares for one or three shares for two. A business that incorporates in California must reserve the right in its articles of incorporation to issue more stock.
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Instructions
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Compare your company's stock price to the current share price of similar companies. If your shares trade at a substantially higher value, it's a sign of success, but it might mean the price is so high that it may intimidate small investors.
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Propose that your board vote for a stock split. Present the arguments for a split to the board members if they're not initially convinced, then call for a vote. The decision to issue more shares is entirely up to the board.
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Announce the split to your investors and the media. Set the date on which the stock will officially split, which will be a few weeks after the board votes.
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Issue extra shares to your stockholders on the assigned date. Most shares now exist as electronic records rather than paper certificates, so it's not usually necessary to print physical copies of stock certificates.
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Tips & Warnings
In addition to making your stock more appealing, cutting the price with a stock split may also increase the rate of trading. This can boost prices.
Splitting stock is usually seen as a sign of corporate strength. As a result, trading and stock prices may go up even more than the lower price would account for.
