Stock splits and reverse splits are common events in the stock market, but they can raise doubts among investors.
The split, also called a split, is done when the company’s management believes that the price of its shares is high and that this could harm the entry of new investors. In this way, it decides to increase the quantity of securities in circulation on the market to facilitate trading.
As a result, the share price is reduced. The value of the company, however, remains the same, as does the value of the shareholders’ investment.
For example, if an investor holds 100 shares priced at R$8 each, they will have a total investment of R$800. If the company decides to divide each share into two, the investor will have 200 shares at a price of 4 reais. Your application will continue to be the same 800 reais.
Grouping, or inplit, works in the opposite way. When the company believes that its share price is low, it can combine several shares into one. In general, this process reduces the volatility of securities.
The operation, as with the split, does not change the value of the investment. If a shareholder owns 100 shares priced at R$1 each, they will have a total investment of R$100. If the company decides to group five shares into one, the investor will have 20 shares at a price of 5 reais each and their investment will be worth the same 100 reais.
Source: Exame
