The 50K Mission System
Stock splits are triggered when share prices increase to levels that are much higher compared to price levels of similar companies in their sector. The motive behind stock splitting is to make shares more affordable to small investors. The underlying value of the company has not changed, but the opportunity to purchase stock in a particular company has opened up. Splits give a signal to the market that a company's share price is increasing. Investors assume growth will continue which encourages buying stocks.
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Companies realize that stock splits are cost effective marketing tools. Splits give shareholders the sense of greater wealth and the price is made more attractive to the average investor. This might just be a "thought" or psychological feeling, but remember the market is a place of speculation and psychological "feel good."
When a company issues a stock split it typically means outstanding performance in the past quarters. Companies that split their stocks usually have fast growth and high momentum making their offerings highly desirable.
Companies use stock separations to make more shares available for investors. The thought behind this strategy is the more shares available the less impact there is on the price of the stock as investors buy and sell. The primary reason for splitting a company's stock is supply and demand. Market research has shown splitting stocks or the "two nickels for a dime" premise increases demand and higher prices are the result. Hence more money flows into a company's coffers.