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After the split, that same investor will own 40 shares worth $190 each, also worth a total of $7,600 - illustrating that the total value of their holding ultimately won't change.įurthermore, even if there's greater demand for the stock because of the lower share price after the split, it will likely be a temporary phenomenon. For example, if an investor holds 10 shares of NVIDIA stock, and each share is worth $760 pre-split, those 10 shares are worth a total of $7,600. On the face of it, it might seem that NVIDIA stock is a buy because of the upcoming stock split, but it doesn't hold up to closer scrutiny. And there's no functional difference between buying 1/4 of a share pre-split or waiting until after the split and buying a full share for the same cost.What's the reason for the stock split? NVIDIA said the board declared the share split "to make stock ownership more accessible to investors and employees." A suitable opportunity? Those investors could have already bought Nvidia anyway, regardless of the split. That means someone with $200 could purchase 1/4 of a share today if they wanted.īecause fractional shares put expensive stocks within reach of any investor, a split shouldn't open up a new customer base of people with lower account balances.

Instead, brokers that allow fractional shares make it possible for any investor - even those with a few dollars - to specify how much they want to invest. Someone with only $200 no longer needs to wait for Nvidia to split in order to buy a stake in the company. See, fractional shares allow anyone to buy fractions of shares, or partial shares, even if they don't have enough investment capital to purchase a full share.

However, thanks to fractional shares, it's becoming less and less likely that a split will have even this effect. Still, the reduction in the per-share price can sometimes have a short-term impact on the stock price due to the company's shares seeming more accessible. Some investors also perceive a stock that costs $200 per share as being "cheaper" than one that costs $800, even though that's not a good way of assessing whether a company's shares are worth their price. Now, companies sometimes split their shares in hopes of driving up demand since more people can theoretically afford to buy shares that cost $200 each instead of $800. Fractional shares reduce the impact of stock splits