What is the purpose of a stock split?

A stock split serves primarily to enhance liquidity in the market by dividing existing shares into multiple shares. When a company splits its stock, the number of shares outstanding increases while the price per share decreases proportionally. This process does not change the company's overall market capitalization, but it makes individual shares more affordable for investors. As a result, a greater number of investors can purchase shares, which can lead to increased trading activity and liquidity in the stock.

In this context, liquidity refers to how easily shares can be bought or sold in the market without significantly affecting their price. A more liquid stock is often more appealing to investors, as it allows for easier entry and exit from positions. Therefore, the main goal of a stock split is to adjust the price of the stock to a more attractive level while expanding the number of shares available, consequently improving market accessibility for a wider range of investors.