Every company that has gone public will issue shares to be sold to the public / potential investors on the stock exchange in order to get additional capital. Stock is one type of investment in the form of securities, where investors will get returns in the form of dividends or a margin from the difference between the purchase price and the selling price. During its development, the company may decide to conduct a stock split. What is a stock split?

Investors in the capital market, especially stocks, must have heard of the term stock split. What is a stock split? And why was the stock split done? stock split is a corporate action that breaks the share price in a certain ratio. For example 1: 5, meaning that the share price is divided into five. For example, from the initial nominal value per share is Rp. 10,000 to Rp. 2,000 after the stock split. Even though the stock price after the stock split was smaller, the number of stock lots was 5 times bigger.

Stock split in a simple sense means dividing the stock value. The goal is to increase the number of shares in circulation and reduce the price per share to make it cheaper so that the transaction becomes busy again. Even though the number of shares has increased, the stock split will not change the amount of paid-up capital. If a stock is busy being traded, the company can still be liquid. Stock split was also carried out with the aim of attracting more investors, especially retail investors. Usually, issuers that do stock splits are companies that have good fundamentals but their share price has reached its highest point. 

For example, during the stock split, UNVR's share price was IDR 42,000 on the regular market. Then UNVR conducted a stock split with a ratio of 1: 5. After this corporate action, the UNVR price was IDR 8,400. Stock split is done by dividing the price before the stock split by this ratio.

When a company conducts a stock split, the number of shares outstanding will increase due to the decrease in the nominal value of the shares. For example, the number of UNVR shares, which increased to 38.15 billion shares after the stock split was carried out from the previous 7.63 billion shares.

From the explanation above, it can be concluded that a stock split can provide benefits for both issuers and investors. The advantage for investors is that the share price is more affordable and the share ownership portion is greater. Meanwhile, the advantage for the issuer is that it makes a stock more liquid or more active and the frequency of transactions carried out by market players increases. Some market players like liquid stocks because it is easier to sell or buy the shares.

Source: OJK.GO.ID