<P> A stock split or stock divide increases the number of shares in a company . The price is adjusted such that the before and after market capitalization of the company remains the same and dilution does not occur . Options and warrants are included . </P> <P> A company may split its stock, for example, when the market price per share is so high that it becomes unwieldy when traded . For example, when the share price is very high it may deter small investors from buying the shares, especially if there is a minimum trading parcel . </P> <P> For example, a company which has 100 issued shares priced at $50 per share, has a market capitalization of $5000 = 100 × $50 . If the company splits its stock 2 - for - 1, there are now 200 shares of stock and each shareholder holds twice as many shares . The price of each share is adjusted to $25 = $5000 / 200 . The market capitalization is 200 × $25 = $5000, the same as before the split . </P> <P> Ratios of 2 - for - 1, 3 - for - 1, and 3 - for - 2 splits are the most common, but any ratio is possible . Splits of 4 - for - 3, 5 - for - 2, and 5 - for - 4 are used, though less frequently . Investors will sometimes receive cash payments in lieu of fractional shares . </P>

What does a 2 1 stock split mean
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