Can a Company Declare a Split and Not Split the Stock?
A stock split affects all the shareholders in the company. Stock splits are relatively rare for smaller, slow-growing corporations, but for larger corporations with steady or sharp increases in share value, stock splits are much more common. A split may turn one share into two shares, or four, or even one and one-fourth of a share. The actual value of the stock does not change--it flows into the new, higher number of shares equally. In theory the lower per-share price makes the company's shares more appealing to new investors.
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Approval Process
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Stock splits are a serious business consideration. The company's board of directors is typically in charge of planning for a stock split, although the board receives feedback from other leaders in the company and often outside consultants.
Share Ownership
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Investors with a large amount of stock ownership are often on the company board and help decide whether or not to make the split. News of a stock split may spread among these investors, but in the end, the board may change its mind and use a different tactic. This should not be confused with a true announcement made to all investors, which is much more official and is rarely changed.
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The Share Split Process
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The process of splitting shares is divided into several different dates. The first step is board approval, at which only board members know there will be a stock date. Next are the announcement and record dates. A careful company will create a record date first, which makes the split official and details the types of shares and investors that will be affected by the split. The announcement date is the day the company lets investors and the public know it will conduct the split. Next, the company sets a payment date, the date before the actual stock split when it lets all affected investors personally know about the split. By this time, the split is a forgone conclusion. The next day the stock will split, although for a brief time, two markets will trade at the same time, one with old shares and one with the split new shares, before the split is completed. This helps investors who had plans to trade the old stock.
Reverse Split
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If a corporation believes it has made a mistake with a stock split, or if it realizes it has to reduce the number of shares outstanding instead of increasing them, the corporation may self-correct with a reverse split. This is the opposite of a split -- the shares are combined together into a smaller total amount. The value does not change, but it is concentrated over a fewer number of shares, raising the price of individual shares.
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