Question

In a 3:1 stock split, an investor who owned 3% of the company before the split owns what percentage of the company right after the split?

Select one:

a. 1%

b. 3%

c. 6%

d. 9%

e. 10%

Answer 1

The investor will own the same percentage of the company ie 3% after the stock split. A stock split does not change the percentage ownership of the company.

Let us assume that the investor held 300 stocks before split, cost of each stock is $ 60. So total he had $18000 worth of shares

After 3:1 split, he now has 900 shares , however the price of each share is now 60/3=20 .So total he has 900*2 = $18000 worth of shares

So both are equal

Hence the correct answer b)3%