What occurs during a Stock Split?

In a stock split, a company divides its existing shares into multiple new shares to increase the total number of shares outstanding. This process does not require any payment from shareholders; they simply receive additional shares based on the split ratio. For instance, in a 2-for-1 stock split, shareholders will receive an additional share for each share they already own, effectively doubling the number of shares while halving the share price. Despite the increase in the number of shares, the overall value of the company remains unchanged, as the market capitalization stays the same; only the share price adjusts accordingly. This mechanism can make shares more accessible to a broader range of investors by lowering the price per share, but it does not charge shareholders any fees or require them to invest more capital.

In the context of the other options, they either misrepresent the technicalities of a stock split or imply additional costs or consequences for shareholders that are not part of the splitting process. Thus, the correct understanding of a stock split is captured well by the notion of distributing more shares without any additional payment required from shareholders.