What happens to outstanding shares and stock price during a forward stock split?

During a forward stock split, the number of outstanding shares increases while the stock price decreases proportionally. This action is typically taken to make shares appear more affordable to investors and to increase the liquidity of the stock.

In a forward stock split, a company issues additional shares to its existing shareholders, based on a specified ratio (for example, a 2-for-1 split means shareholders will have twice as many shares, but each share is worth half as much). Therefore, while the total market capitalization of the company remains the same, the increase in the number of shares outstanding leads to a lower stock price reflecting the split ratio.

This makes option B the correct answer as it accurately describes the mechanistic outcome of a forward stock split, which is an increase in outstanding shares and a corresponding decrease in the stock price.