Share splits and reverse splits
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Simcountry is an Online Digital World where you are the President of a country. |
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Share splits and reverse splits
Share values in Simcountry can reach very high or low values. In the real world, when share values increase to very high levels, companies split their shares 1 to 2 or any other form they choose for.
A share split of two for one means that every share owned in the corporation is split into two shares. As a result, the number of shares doubles but as the corporation value does not change as result of the split, the value of the shares is cut by two.
A share split does not have any consequence for the value of corporations, the PE value remains the same as value is cut by two and profit per share is also cut by two because there is a double number of shares.
We have chosen to automatically split shares two for one if their value is higher than 800. Shares that have a value of 4000 will be split two for one three times and will end up with a value under 800.
Shares with very low value will be reverse split meaning that for each two shares, the shareholders will have one but its value will double. The numbers of shares are all cut by a factor of two but again, the total value is not changed, PE ratio remains unchanged. Reverse splits occur when share values decline under 260.
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