The capital account after the dividend is distributed, is as below
common stock 200000
additional paid in capital 50000
Both in 100% stock dividend, and 1:1 stock split, the number of shares is doubled. And since the EPS is halved in both cases, the market value, which depends on PE multiple, gets halved.
IN BOTH CASES, THE TOTAL SHARE HOLDER EQUITY WHICH INCLUDES THE RETAINED EARNINGS IS THE SAME, the number of shares outstanding also is the same. Only the par value is different.
TOTAL MARKET VALUE OF THE COMPANY
The total market value of the company is the market value of the stocks multiplied by the number of shares outstanding. Treasury shares are not counted for market value because
1. They are a decrease in the capital until reissued.
2. Therefore, they are not counted for when calculating the EPS, and for distributing dividends.
Stock splits and stock dividends do not affect the total market value of the company. This is because of the following reason
If the earnings do not change over the previous year, when stock dividend or a split is declared, the decrease in the market value of share of the shares caused by a reduced earnings per share(no of shares increases) is compensated exactly by the increase in the number of shares.
THEREFORE THE TOTAL MARKET VALUE OF THE COMPANY DEPENDS ONLY ON THE EARNINGS IN THAT YEAR. AND THE MARKET VALUE OF A SHARE DEPENDS ON THE EPS.