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What is a stock split?

A stock split is when a company increases the number of its shares by a specific multiple. This is usually done to improve the stock’s liquidity.

Although the total number of shares outstanding increases, the dollar value of these shares remains the same. This is because the share price decreases proportionally by the stock split multiple.

The most common split ratios are 2:1 and 3:1 (two-for-one and three-for-one). This means, for each share held prior to the split, an investor will receive 2 or 3 shares after it happens.

At XM, stock splits are treated the same as on the actual stock exchange. Your position size is adjusted based on the split ratio, leaving the total value of your position unaffected. So, if a 2:1 stock split happened, and you were holding 100 shares, after the split you’d have 200.

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