Naturally, in a share split, there will be reduction in the par value per share and also the market price of the share. In this example, the par value of XYZ Bhd will be reduced from RM1 per share to either RM0.50 or RM0.25 per share depending on the choice of share split undertaken. But it is important to note that at the same time the market price of one board lot of XYZ Bhd shares will also be reduced to either RM500 or RM250 respectively. However, it is not a cause for concern because from one board lot an investor will now have either 2 or 4 board lots etc. with the total market value of RM1,000.

Is it advantageous to investors?
Theoretically, in a share-split exercise, shareholders/investors do not gain or lose anything. Splitting shares means that each outstanding share is broken into more shares and it also breaks down the par value. However, the reduction in par value of the shares makes the shares more attractive and affordable to a wider group of shareholders and investors. For instance, if XYZ Bhd’s shares sell for RM10 a share and one board lot costs approximately RM 1,000 (before transaction costs), this could be too expensive for some investors. However, if the shares were split, one board lot would cost only RM500 (2 for 1 share split). As the shares become more affordable, it will enhance the liquidity of the shares because more people will feel that they can now afford to buy the shares.

Finally, a share split is just like slicing a pizza. Regardless of whether you slice it into 2 or 4 slices, the size of the pizza will remain unchanged but you will get extra slices.