IRB Infrastructure’s shares have split in the ratio of 1:10 in the stock market this week. If told in the language of the stock market, the stock of the company has been split. Along with this, there was a stock split in the shares of two more companies Shreeji Translogistics and KCD Industries India last week.
What is a stock split?
A stock split occurs when a company issues more shares to existing shareholders in a specified proportion, reducing the face value of the shares.
For example, ABC Ltd. has decided to split its shares with the face value of Rs.10 in the ratio of 1:10. The face value of its share of the company will be reduced to Re 1 and nine additional shares will be issued to one shareholder of the company. The stock of the company used to trade at Rs 100 before the split. Will trade at Rs.10 now.
Let us tell you, the company’s stock split does not affect its market cap. Only the number of outstanding shares increases.
keep these dates in mind
In a stock split, investors need to take special care of two dates record date and ex-date. The record date is the date the company decides which shareholders are eligible for a stock split. Ex-date is the date on which the shares of the company trade in the market after the split.
How can you take advantage of the stock split?
At present, after the implementation of the T+1 settlement cycle in the stock market, the record date and the ex-date have become the same. To participate in a stock split of a company, an investor must own shares at least a day in advance.