Exchange one share for a new share

A clever question!

In the context of corporate finance, exchanging one share for a new share is known as a "share split" or "stock split." This is a corporate action where a company decides to divide its existing shares into a larger number of shares, while keeping the overall value of the company's equity unchanged.

For example, let's say a company has 1 million shares outstanding, with a par value of $1 each. The total value of the company's equity is $1 million. If the company decides to do a 2-for-1 share split, it would issue an additional 1 million shares, so that the total number of shares outstanding would become 2 million. The par value of each share would remain $1, but the total value of the company's equity would still be $1 million.

In this scenario, if you own 1 share of the company before the split, you would receive 2 new shares after the split. Your ownership percentage of the company would remain the same, but you would now own a smaller percentage of each share.

Share splits are often used to make the company's stock more attractive to individual investors, as it can increase the liquidity and trading volume of the stock. They can also be used to reduce the stock's price, making it more accessible to a wider range of investors.