A stock split is an official action taken by a corporation to divide its existing shares into multiple shares. This process increases the number of outstanding shares, while simultaneously reducing the price of each share proportionally. For example, if a company implements a 2-for-1 split, it will double the number of outstanding shares and halve the price of each share. A stock split can be initiated for a variety of reasons; however, companies typically do so to make their stock appear more affordable, as this usually encourages investors to buy in. In doing so, companies also improve their liquidity and attract new institutional investors.