Introduction
A stock split increases the number of shares in your company by a specified factor whilst proportionally reducing the nominal value per share, leaving total equity value unchanged. For example, a 1:10 split converts 100 shares into 1,000 shares, each worth one-tenth of the original value, but stakeholders' total holdings remain the same. Stock splits are commonly used to increase share availability before funding rounds or employee equity grants, improve liquidity, or adjust share structures for administrative efficiency. This guide explains what stock splits are, when to use them, and how to create a stock split transaction in Ledgy.
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" > 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: |
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:
