A company has a stock split to adjust either the:
Amount of shares in the market, or
The price of outstanding stock
In most cases, the company gives you more shares of stock for every share that you already own. These are often referred to as 2-for-1 or 3-for-1 stock splits. On rare occasions, a company might have a reverse split and give you fewer shares for each share that you own. For example, they might have a 1-for-2 stock split.
If the stock is split 2-for-1, this means that for every share you own, you now own 2 shares. The important fact to remember is that the total value of the stock doesn’t change. Instead, the value of each share changes.
Example: If you own 100 shares of a company worth $10 per share, the total value of all your stock is $1,000 ($10 X 100 shares). After the 2-for-1 stock split, the total value of your stock is still $1,000. The difference is that you now have 200 shares of stock and each share is worth $5 ($5 X 200 shares).
A reverse split works the opposite way. A 1-for-2 split reduces the 100 shares you own to 50 shares. Now, each share is worth $20 instead of $10, but the total value is still $1,000 ($20 X 50 shares).