When a company decides to split its stock, it generates a lot of excitement. A stock split occurs when a company increases its number of shares outstanding by dividing existing shares or by multiplying share count and reducing share price to compensate. Although a stock split lowers share prices, it doesn't change the fundamental value of a business itself or the total value of the shares owned by shareholders.

Lower stock prices for a growing business attract a lot of retail investor attention. For example, after splits, prices for Apple (AAPL 0.32%) (4-for-1 split on Aug. 28, 2020) and Nvidia (NVDA -0.87%) (4-for-1 split on July 19, 2021) both zoomed higher.

Stock splits in 2023

Stock splits in 2023

1. PACCAR

Truck designer PACCAR announced its 3-for-2 split in December 2022. The company paid out an extra share of stock for every two shares owned by shareholders of record as of Jan. 17, 2023. The distribution took place at the close of the market on Feb. 7, 2023. PACCAR's previous stock split was also a 3-for-2 split in October 2007.

2. Monster Beverage

3. Churchill Downs

4. Novo Nordisk

5. Mueller Industries

Stock splits from 2022

Stock splits from 2022

As has often been the case, 2022's stock splits were dominated by big tech companies that have been enjoying rapid growth and expect to continue expanding for many more years to come.

1. Amazon

In March 2022, Amazon's board of directors announced it had approved a 20-for-1 stock split for shareholders of record on May 27, 2022. After years of fast and steady growth, Amazon stock traded for more than $2,000 per share ahead of the stock division. The split reduced the share price to slightly more than $100 -- although Amazon stock has come under pressure since then due to the bear market. The previous time Amazon split its shares was on Sept. 1, 1999, when it executed a 2-for-1 split.

2. Alphabet

Alphabet also announced a 20-for-1 stock split in tandem with its fourth-quarter 2021 earnings update in February 2022. Shareholders of record on July 1, 2022 received 19 additional shares for every share owned on July 15, 2022. The company's last split was in early 2014, before it changed its corporate name from Google to Alphabet.

3. Shopify

In April 2022, Shopify announced changes to its governance structure to keep voting power in the hands of co-founder and CEO Toby Lütke. Along with the changes, the company announced a 10-for-1 stock split to be executed on June 28, 2022, for shareholders of record on June 22. The e-commerce software provider is aiming to make ownership of its shares more accessible as it pursues long-term growth. This was the first time Shopify stock had split since its initial public offering (IPO) in 2015.

4. DexCom

5. Tesla

In late March 2022, Tesla filed a report with the Securities and Exchange Commission (SEC) indicating it would put a stock split proposal to a vote at its annual shareholders meeting. The company’s shareholders approved the 3-for-1 split during its annual shareholder meeting on Aug. 4, 2022, and it was implemented at the close of market on Aug. 24, 2022. The last Tesla adjustment, a 5-for-1 share split, took place in August 2020.

6. Palo Alto Networks

Cybersecurity leader Palo Alto Networks reported it would be initiating a 3-for-1 stock split when reporting its final fiscal quarter of the year in August 2022. The split was executed on Sept. 13, 2022, and began trading with an adjusted price the following day. This was the first time Palo Alto Networks had split its stock.

Why companies do stock splits

Why companies do stock splits

Stock splits (as well as reverse stock splits) typically don't change the fundamental value of a company, and they don't change an investor's ownership stake in the company. For example, if you own a slice of pizza equal to one-quarter of the whole pie, cutting your slice up into smaller pieces doesn't change the fact that you still have one-quarter of the total pizza.

Additionally, many publicly traded companies give employees an ownership stake in the business by granting them shares in the form of stock-based compensation. A smaller share price can help a business manage the benefits issued to its employees.

Also, many companies repurchase shares as part of a return on investment to existing shareholders. Again, a smaller share price can help a company manage the purchases and the return to investors.

Should you invest?

Should you buy a stock because of an upcoming split?

If you are a long-term investor who plans to own shares of a company for at least a few years, an upcoming stock split is no reason to buy an ownership stake in a business. A company generally has good reasons for initiating a split, but it doesn’t change the fundamental value for shareholders.

Rather, when deciding whether to invest, look for companies that are benefiting from long-term secular growth trends, are growing faster than their peers, and have healthy profit margins and balance sheets.