A stock split's main purpose is to make a company's shares more appealing to potential investors. By raising the number of outstanding shares, it improves a company's liquidity. Stock splits do not change the market value of a corporation; rather, they are a reassignment of share value by increasing the number of shares.

For example, on Monday, the much-anticipated Amazon.com, Inc. (NASDAQ:AMZN) stock split was completed; shares went from $2,447 on Friday's close to $122 on Monday's open.

Retail investors who had been priced out of the e-commerce behemoth's stock should now be able to purchase full shares and potentially create a trading strategy around it.

A corporation can, on the other hand, reverse split, increasing share value by reducing the number of outstanding shares. A company will normally do this to prevent being delisted from the exchange to which it is assigned or to improve its general image.

Citigroup Inc (NYSE:C) is an example of this: in 2011, during the financial crisis, the business notably executed a 1:10 reverse stock split: shares were valued at $4.52 before the split, and after shares reflected the x10 value of $45.20.

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