A change in the capitalization of a company that increases or decreases the number of shares that are outstanding and commensurately adjusts the value of the shares and the exercise prices of any options to buy shares. For example, if an employee has an option to purchase 50 shares at $10 per share and the company has a 2-for-1 stock split, the employee thereafter has the option to purchase 100 shares at $5 per share. A stock split is often effected by paying a dividend of additional shares to all stockholders.
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