A stock split occurs when the number of a company’s shares outstanding are increased by a specified factor, often 2 to 1. When the split takes place, the company’s share price will decline by an amount proportional to the increase in shares.

For instance, if a stock trading for $30 splits 2 for 1, a shareholder with 100 shares would receive another 100 shares for a total of 200, while the price would decline from $30 to $15 to reflect the increased share count. If the same stock were to split 3 for 1, the shareholder would receive an additional 200 shares for a total of 300, while the stock price would decline from $30 to $10 as a result of the split.