What does it mean when a stock splits?

When a stock splits, existing shares of the company's stock are divided into a greater number of shares. Two-for-one and three-for one splits are the most common types of splits, according to Investopedia. A two-for-one split means every share of existing stock is divided into two new shares.

With a three-for-one split, someone who had 100 shares of stock before the split ends up with 300 shares of stock after the split. A primary reason for a stock split is to reduce the trading price of shares, making it more affordable for more investors, according to Investopedia. The increased number of shares also creates a more liquid marketplace.