What is a stock split?
Stock and reverse stock splits are mandatory corporate events that will impact the number of shares you hold in a position. If any security you hold is impacted by a split, it'll be automatically updated, you don't need to do anything.
A stock split results in an increased number of shares held for a security, without affecting your market value of the holdings. The market price of the security will reduce to make sure valuation remains consistent. For example, if you own one share of a company, (let's call it ABC), which trades at $100 per share and the company declares a 2:1 stock split, your new holdings of ABC will be two shares and the price per share will reduce to $50. Your overall market value remains at $100.
Reverse stock splits work in the opposite way. This will reduce the number of shares you hold, and increase the price per share. For example, if you own 10 shares of a company (let's call it XYZ), which trades at $5 per share and the company declares a 1:2 reverse stock split; your new holdings of XYZ will be five shares and the price per share will increase to $10. Your overall market value remains at $50.
Companies usually perform splits as a method to either increase or decrease share prices.