Netflix, Inc. (NASDAQ: NFLX) surprised the market today with an announcement of a 10-for-1 forward stock split. This move will see each current shareholder receive nine extra shares for every share they hold, effective after the market closes on November 14th. Trading on the split-adjusted shares is set to begin November 17th. The company’s shares, now priced above $1,100, will therefore be divided by ten, making individual shares more affordable.
A forward stock split essentially breaks each existing share into multiple shares. In Netflix’s case, every one share will become ten. While this might sound like it increases the number of shares dramatically, the total value an investor holds does not change. The share price simply becomes one-tenth of what it was before the split. For example, if you owned one share valued at $1,100 pre-split, you would hold ten shares valued at approximately $110 each post-split. The overall investment stays roughly the same.
The primary reason companies perform such splits is to bring down the trading price of individual shares. When a stock price reaches very high levels, such as Netflix’s recent pricing above $1,100 per share, it may discourage smaller investors and employees who want to buy shares. Many investors find it psychologically easier to buy stocks priced under $100 or a few hundred dollars. By lowering the price per share, a stock split makes shares more accessible without changing the company’s actual value.
Netflix’s announcement underlined that an important motivation for this split is to make shares more accessible to employees participating in the company’s stock option program. When share prices grow too high, employees may struggle to buy even a single full share. A lower per-share price following the split helps them invest and benefit from company growth.
It’s important to note that this split does not affect the fundamental value or the market capitalization of Netflix. The company’s total valuation remains the same, just distributed across a larger number of shares. Institutional investors, who often buy in large blocks, are mostly indifferent to share price, but retail investors and employees often prefer lower-priced shares for practical reasons.
This will be Netflix’s first stock split since a 7-for-1 split in 2015. Since then, its shares have soared, partly due to robust subscriber growth and expanded content offerings. The move makes Netflix one of several major corporations that have balanced high share prices with stock splits to ensure continued investor appeal.
While stock splits might seem like a mere technical detail, they carry practical impact by opening the door wider for individual investors and employees to hold shares. For Netflix, this 10-for-1 split reflects both a milestone in share price appreciation and a gesture toward broader ownership access.
