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Definition

Where a company decides to divide its existing issued share capital into more shares to increase tradability. For example, if a company with 10m shares in issue, trading for 1 000c in the market has a market capitalisation of R100m, and it decides to do a 10 for 1 split, then it will end up with 100m shares of 100c each and its market capitalisation stays the same. The market capitalisation of the share is usually not affected, except that the share, once split, becomes cheap enough for a larger group of investors to afford thus increasing demand. This is also known as a sub-division. There is an increase in the number of shares held by each shareholder, with a proportionate reduction in their price so that there is no change in the total value of the shareholding. This is done by breaking each share down into smaller pieces. The effect is to bring the share's value within the reach of smaller investors. In today's electronic market there are no additional dealing costs for buying an "odd lot" of shares (i.e. less than a round hundred) so splits have become less common.

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