Part 2/8:
To begin, Dylan Lewis explained the concept of a stock split using a relatable metaphor. He likened a company's value to a pie, where the ownership shares represent slices of that pie. In basic terms, a stock split divides the current shares into more shares; for instance, a two-for-one split would transform ownership from one share worth $100 to two shares worth $50 each. In this scenario, while the number of shares increases, the overall company value remains the same, leading to the question: why do companies choose to engage in this practice?
Rationale Behind Stock Splits
Companies may implement stock splits for several reasons: