Stock Split Season Is Here — And These Are the Companies Wall Street Is Watching Most Closely

When a company announces a stock split, odd things happen on retail investing apps and in trading rooms at the same time. There has been no change in the share price. The company’s profits are unchanged. Nothing has changed, including the quantity of goods sold, the number of factories, or the size of the workforce. Nevertheless, the stock has a tendency to rise. This has been consistently documented by researchers to the point where it has been given its own name, the announcement premium. For an event that is, in a purely mechanical sense, the corporate equivalent of splitting a twenty-dollar bill into two tens, stocks typically rise two to four percent during the period surrounding a split announcement.

The mechanics are fairly straightforward. A stock split lowers the price per share by the corresponding ratio while increasing the number of outstanding shares. A $100 share is split two for one to create two shares at $50 apiece. An investor who had ten shares totaling $1,000 now has twenty shares totaling $1,000. The market capitalization of the company, which is the sum of the values of all of its shares, remains constant. Cut into multiple pieces, it’s the same pie. The company issues new shares to current shareholders “in a set proportion,” and the total value of those shares remains constant, according to FINRA’s exact description. The metaphor of pizza is used by Investopedia. In any case, the important thing is that nothing significant has occurred.

However, something does occur in the markets. In June 2024, Nvidia divided its shares ten for one, lowering the price per share from about $1,200 to about $120. Nvidia’s value was not increased by the split alone. It made the shares available to a wider range of investors, especially those whose brokers did not allow fractional share purchases and those who were psychologically opposed to purchasing anything that cost more than three figures. Even when investors logically realize that the price per share says nothing about the underlying value, studies of investor behavior have revealed enduring preferences for shares trading in the $10 to $50 range, with real resistance above $100. This is known as the nominal price illusion by behavioral finance researchers. The idea that a $10 wine is more enticing at $10 than it would be at $15, even if nothing else has changed, is the equivalent in real life. It shouldn’t be important. It clearly does.

The intentional exception that makes the rule clear is Berkshire Hathaway, which has never divided its Class A shares. BRK has been permitted by Warren Buffett.A to trade at more than $675,000 per share, purposefully keeping the price high enough to draw in long-term investors who are devoted enough to the thesis to purchase at any price and weed out short-term traders. Berkshire’s exceptional shareholder stability over decades may have been facilitated by the absence of a split. However, Berkshire continues to be an anomaly, and the majority of businesses eventually decide to split the number of shares rather than allow the nominal price to stray into areas where retail investors are hesitant due to perceived or actual psychological barriers at specific price points.

All of this is mirrored in the reverse split, which merits consideration on its own. A reverse split is typically a defensive move, whereas a forward split is nearly always a sign of confidence—a company splitting because the price has increased to the point where management wants to increase its accessibility. In order to keep its Nasdaq listing, Erayak Power Solution Group, a Chinese producer of inverters and power products, announced a 1-for-10 reverse split that will take effect on April 20, 2026, drastically reducing its share count. Following the announcement, the company’s Class A shares were trading at about $0.48 in pre-market trading, which places it firmly in penny stock territory and explains why the exchange minimum price requirement becomes the controlling concern. Small OTC-traded companies frequently experience reverse splits, which often precede further decline. FINRA states unequivocally that reverse splits “tend to go hand in hand with low-priced, high-risk stocks.” Although the statistical weight of history is against them, this does not imply that every reverse split ends poorly.

When split announcements pile up during an earnings season, it’s difficult to ignore the fact that the behavioral aspect of stock splits—rather than their mechanical aspect—is what makes them intriguing. The math is simple. The psychology isn’t. Even though the two scenarios are identical, an investor who holds 100 shares at $50 each following a split may feel differently about their position than they did when they held 50 shares at $100 each. Trading volume is driven by that emotion. The announcement premium is driven by it. Additionally, it helps to explain why businesses still make splits in the age of fractional share investing, even though the case for practical accessibility has been greatly undermined. The company is unaffected by the split. However, it does appear to alter investors’ perceptions of the business, at least temporarily.