Articles on: Trading

Stock Splits

A stock split occurs whenever a company issues new shares to its existing stockholders without diluting ownership in the company. During a stock split, shareholders will receive additional shares that are based on a split factor, or a multiplier for the number of shares that they will receive.

For example, if a stock undergoes a 2:1 stock split, existing holders of 1 share will receive 1 more share from the company (bringing their total to 2 shares). While the company's value doesn't change, their supply of shares does - which directly affects the price of the shares.

If company XYZ trades a value of $100 per share, and undergoes a 2:1 stock split, the share price after the split will be $50 and all existing shareholders will receive one additional share per owned share from the company.

A reverse stock split functions under the same principles as a normal stock split, except the company de-lists part of its shares, which constricts supply, and increases the price of the stock.

For example, if a stock undergoes a 1:2 reverse stock split, existing holders of 2 shares will have 1 share removed from their securities accounts. The price of a single share will double.

How Stock Splits Affect Morpher

Trading stocks on Morpher is made possible by the virtualizing properties of Morpher's smart contract protocol. This means that the underlying shares are never actually traded. You need to understand how stock splits may affect your trading experience:

Existing Positions

If you have a position in a stock that is undergoing a stock split, your returns will not be affected. Your position will remain live and be adjusted to reflect the stock split and its effect on the price.

Stop Orders

If you have any limit orders or protective stops set for a position that is undergoing a stock split then they will be canceled.

Restricted Trading

All trading for the symbol undergoing a stock split will be paused starting 2 days before the stock split effective date. Trading should resume after the market opens on the day of the split. Please note that in rare situations trading may remain paused up to one day after the stock split date.

Updated on: 31/08/2023

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