Shadows, Inc., had shares outstanding that were valued at $120 per share before a two-for-one stock split.

Question:

Shadows, Inc., had shares outstanding that were valued at $120 per share before a two-for-one stock split. After the stock split, the shares were valued at $62 per share. If we accept that the firm’s financial maneuver did not create any new value, then why might the market be increasing the total value of the firm’s equity?