What does a stock split achieve?

A stock split primarily serves to adjust the stock price without altering the company's overall performance. When a company executes a stock split, it increases the number of shares outstanding while simultaneously reducing the price per share. This process makes the stock more accessible to a wider range of investors, as lower-priced shares can often attract more buyers and potentially enhance liquidity in the market.

The fundamental economic value of the company remains unchanged because the split does not affect the company's market capitalization; it only adjusts the price and number of shares. Therefore, while the stock price appears lower following the split, the total value of the investors’ holdings remains the same. This clarity in share price also encourages broader participation among retail investors who may be deterred by high stock prices.

Other options do not accurately reflect the implications of a stock split. For instance, a stock split does not change the company's profitability or its market capitalization, nor does it inherently increase the company’s market value. It specifically aims to make the shares more affordable and thus potentially more appealing to a diverse group of investors.