I have a stupid stock question

[dvcfamily41801]

My husband received notice that the company's stock will be doing a 3 for 2 split. What does this mean? We are so dumb when it comes to this stuff. We know he has a bunch, some available to use now, but we just dont think of us having it, if that makes any sense. Say he has 500 shares...what happens after the split? And what happens to the value of the stock?

We are so clueless

 

[Bob Slydell]

If you have 500 shares, you'll get 750 shares (it's essentially 1 1/2 per share). The value will initially be 2/3 the original value per share (so you're not technically getting anything extra, at least right away).

 

[jrydberg]

I'll use a simple example. Say the stock is valued at $10/share and he has 100 shares. After the split, he'll have 150 shares valued at $6.67/share.

Generally a stock that splits has gone up considerably in value and the expectation is that it will continue to go up (or at least not decline).

 

[Papa Deuce]

If you have 500 shares, you'll get 750 shares (it's essentially 1 1/2 per share). The value will initially be 2/3 the original value per share (so you're not technically getting anything extra, at least right away).

True, however some believe that investors like to buy lower priced stocks, thinking that they have more room to grow, and usually a split, or rumor of a split can drive the price up a little bit per share.

EDIT, BTW, the dividend gets split as well, meaning that you would not now have 750 shares of a stock paying "x" dividend, you have 750 shares paying 2/3 of "x" dividend, ( if the shares pay dividends at all ).