Stock Split” is an increase in a Corporation’s Issued and Outstanding Shares, which causes a proportional decrease in the related price per share. For example, if a Corporation has 1,000 shares of Common Stock as its Issued and Outstanding Shares, then a 1,000-to-1 Stock Split would increase the Issued and Outstanding Shares to 1,000,000 shares of Common Stock and the related price per share initially should decrease by a factor of 1,000. The relative Equity Ownership of the Corporation among the Stockholders would not change given that each Stockholder would receive more shares of Common Stock in proportion to its Equity Ownership immediately prior to the Stock Split.

A Public Company may use a Stock Split to reduce its publicly-traded price per share in an effort to increase the liquidity of its Stock and become more attractive to more Investors (e.g., retail Investors). In practice, a Stock Split often is effected through a Stock Dividend that does not require Stockholder approval.

Also, many Founders who structure their Corporations on their own or with the “assistance” of Door Lawyers often need to rely on a Stock Split in order to restructure the Equity Capitalization as part of a “corporate cleanup” process that is required prior to a Financing, the implementation of a Stock Incentive Plan or other Stock-related transaction.