Share split

A share split is similar to a scrip issue. Shareholders are issued with new shares are no cost, but its effect on the balance sheet is different from that of a bonus issue.

A split reduces the par value of each share, but increases the number of shares by the same proportion. For example, if the par value of shares is reduced from 10p to 5p, then the number of shares will be doubled, and each shareholder will receive two shares to replace each one they currently own.

Because a split does not increase the share capital, it cannot be taken as a gesture of confidence as a bonus issue can. However a split can improve the liquidity of very high priced shares.

The number of shares can be reduced by a similar exercise, a reverse split or share consolidation.

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