What is a stock split?
A stock split happens when a company increases the number of its shares by an agreed amount, e.g. splitting 100 shares by a factor of 1:10 will result in 1000 shares, each share worth one-tenth of the original value, but the value in one's total holdings will remain the same.
The reason for a stock split can relate to liquidity and availability of the current stock allocation. In the event of a funding round or new employee stock option rollout, it may be prudent to increase the amount of stock available through a stock split so it can be reallocated more efficiently.
How to create a stock split on Ledgy
Go to Ownership > Transactions
In the top right, choose "+ Add transaction" > Other transactions
Under the Stock Transactions section, click Stock Split
Include the relevant information within the Date and Split factor fields
Optional fields: Add any Internal notes and attach relevant documentation to the stock split transaction
Click to Save in the bottom right corner
Note: Ledgy will offer an explanation for how the split will affect the shares going forward once added, as shown in the example below:
To review the changes, go to Ownership > Transactions and type 'Stock Split' in the search bar in the top left corner to find the relevant transaction.
Tip: You can also identify a Stock Split transaction with the light-pink SP icon.
Within the transaction bar, you will see the date it was created, the split factor, and the nominal value of the grants henceforth.
Note: Please keep in mind that the Stock Split does not retroactively change the nominal value of transactions created in the past and only affects active grants (non-terminated) at the time of the split. Any future grants will be subject to the new post-split nominal value.
Additionally, it's possible to check how any stock splits have affected the nominal value of the shares under Ownership > Share Classes > summary of Nominal value per share, as shown below: