A stock split is sometimes confused with bonus shares, however it is different from bonus shares. So, what is the difference between these two and which one is better for the investors? To start with some basics - all publicly-traded companies have a set number of shares that are outstanding on the stock market. These shares are nothing but sub division of capital. So if a company's capital is 100 m divided into 10m shares of 10 each, then this 10 is called the face value of the share. Stock Split: A stock split is usually done by companies if their share price increase to levels that are either too high or are beyond the price levels of similar companies in their sector. The move is generally seen to improve the liquidity of scrip since more investors participate due to the smaller ticket size. A stock split is done to increase the number of shares that are outstanding by issuing more shares to current shareholders. For example, in a 2-for-1 stock split: Two shares for one share.
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