Advantages of a Stock Split
1. Increased Liquidity: By increasing the number of shares outstanding, stock splits can enhance liquidity in the company’s stock. This higher liquidity can lead to narrower bid-ask spreads and improved trading volumes, making it easier for investors to buy and sell shares.
2. Improved Accessibility: Stock splits reduce the price per share, making the stock more affordable to a wider range of investors. This increased accessibility can attract new investors who may have been deterred by a higher share price, potentially broadening the company’s shareholder base.
3. Psychological Impact: Stock splits often have a positive psychological impact on investors, signaling confidence in the company’s growth prospects. The lower post-split price per share may create a perception of affordability and attractiveness, leading to increased demand for the stock.
4. Marketability and Visibility: A lower stock price post-split may enhance the company’s marketability and visibility, especially among retail investors. This increased visibility can attract attention from analysts, media, and individual investors, potentially driving up interest in the company’s stock.