What is a double stock split
Stock split and capital increase: what to watch out for
In a stock split, shares are split up and thus increased.
It does this by cloning a stock, so to speak.
Stock split - an example:
Let's take a simple example:
In the case of a 1: 2 share split, the number of shares is simply doubled. The market capital remains the same.
And so each of the shares that existed after the split is only worth half.
Companies usually decide to take such a move in order to lower the price per share.
This makes the paper more attractive for many investors, as in our example they only have to spend half of their money per unit certificate.
Stock split could be a positive sign
The logic according to which stock splits take place is due to a more or less long-term upward trend of the company and its shares.
Because if the share has climbed so far due to the company's development that the management decides to carry out a share split, that speaks for the company. It simply wants to be attractive to a wider range of investors.
However, investors still have to look closely at the company's development and, above all, look at its future prospects.
More on the subject: This is how a stock split works
In addition, a stock split plays a decisive role in the dividend.
Because anyone who - as in our example - joins a company after a stock split, receives the share for half the purchase price, but only half of the expected dividend.
This is a distribution that all shareholders get. With twice the number of shares it is only half.
Capital increase dilutes the shares
A capital increase of a company also fundamentally dilutes the shares of the previous shareholders. Because in such a company, a company issues new shares in order to raise fresh capital.
Here, too, the simple calculation applies that an increase in the shares and thus the potential shareholders dilutes the dividend.
However, in most cases of capital increases there are subscription rights through which existing investors can keep their shares in the company.
They are therefore offered to keep their stake in the company by purchasing new shares or even to expand them.
Money flows into the company through a capital increase through a share split
Either way - from the company's point of view, money flows into the till, for example to make seemingly lucrative investments for which the previous capital would not have been sufficient.
Because with a successful capital increase by means of a stock split, the company sold new shares - and thus earned money and increased its market value.
The hybrid: "bonus shares"
A special form of the capital increase is the "nominal capital increase".
Here, the company's retained earnings are converted into shares and given “free” to the previous shareholders.
Again, as with a stock split, the reason is usually that a company expects advantages from a lower share price.
Logically, “free” is misleading in this sense.
Because the existing shareholder does receive shares "for free", but all shares are worth less, which is why nothing changes on the credit side in his custody account if the conditions remain the same.
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