What is a forward split?
It is a manoeuvre by companies to sub-divide their shares by exchanging a larger number of new shares for a smaller number of existing shares, for example one old share becomes 100 new shares. The total value of the investors' holdings will not change.
Where have you heard about forward splits?
As an investor you may be informed of forward splits by one or more of the companies in which you are invested. Your financial adviser may draw your attention to a forthcoming forward split and explain how it will work.
What you need to know about forward splits.
Companies may want to change the 'weight' of their shares for various reasons, either amalgamating existing stock into bigger, 'heavier' new shares or, in the case of forward splits, breaking up large shares into 'lighter' stock. This may be done in order to make the shares easier to trade among a wider investor base, given that less capital will be needed to buy each share. The financial value of someone's holdings will not be affected, as, for example, one share worth $10 will be exchanged for ten shares worth $1.
Find out more about forward splits.
Forward splits are the mirror image of the opposite manoeuvre, the reverse split. Learn more about the reverse split from our definition.