A stock split changes the number of shares outstanding and the price per share in offsetting proportion, leaving the total value of a holding untouched. This is a description of a corporate mechanism, not a suggestion about any investment decision.
The arithmetic is neutral
In a split, each existing share becomes several, and the price adjusts by the same factor. A holder of one hundred shares ends with more shares worth the same in total.
Nothing about the underlying business changes. Revenue, earnings and assets are identical the day after, and per-share figures are restated to match the new count.
Historical charts are adjusted retroactively so past prices remain comparable, which is why an old price on a chart may not match what anyone actually paid.
Accessibility is the traditional reason
A high share price once created a genuine barrier, because shares traded in round lots and a small investor could not buy a partial share.
Splitting brought the price into a range where ordinary buyers could participate, widening the shareholder base.
Fractional share trading has weakened this rationale considerably, since an investor can now buy any dollar amount regardless of the share price.
Index membership and options add pressure
Some indexes weight their members by share price rather than by market value, which gives an unsplit high-priced company outsized influence.
That can make a company ineligible or disruptive for such an index, and splitting resolves the issue without changing anything real.
Options contracts also cover a fixed number of shares, so a very high price makes a single contract expensive and reduces trading in the company's options.
Signaling explains the timing
Boards typically split after a sustained price rise, so the announcement carries an implicit statement that management does not expect the price to fall back.
This is why splits cluster in strong markets and are rare after declines, and why researchers treat the announcement as information about management's outlook rather than about value.
Reverse splits work in the opposite direction, consolidating shares to raise the price, most often to satisfy an exchange's minimum price requirement for continued listing.
The mechanics take time to settle
A split is approved by the board, announced with a record date, and executed by the transfer agent, with the adjusted price appearing on the following trading day.
Positions held through brokers update automatically, though cost basis records are restated in ways that can briefly look wrong on a statement.
Because nothing economic occurs, a split is generally not a taxable event, but the treatment of any particular transaction is a question for a tax professional.