Price Reaction

• Many investors believe that stock splits are bullish because only rising stocks split and the stock price often jumps around the time of the split, but longer-term implications are usually less uniform.
  
  

First Split

• The first split in a stock that has risen after a long dormancy usually has a positive effect on the stock price, because the stock is expected to rise even further.
  
  

Excessive Splits

• Excessive stock splits (three or four in a couple years) usually indicate that the stock has risen too far, too fast, and the run may be over. Following a third or a fourth split, many stocks begin to decline shortly after the initial post-split investor enthusiasm subsides.