Netflix (NASDAQ: NFLX) announced on Thursday a 10-for-1 stock split. This means that for every share of Netflix stock currently held, shareholders will receive an additional nine shares, resulting in a total of ten shares.

Following the split, Netflix's stock price will be reduced to one-tenth of its current value. The stock closed at $1,089 on Thursday.

In a statement, the company explained that the move aims to "reset the market price of its common stock to a range more accessible to employees participating in the company’s stock option plan."

After the announcement, Netflix shares rose as much as 3% in premarket trading on Friday.

The company stated that the split-adjusted shares will begin trading on November 17. For example, if the split were executed now, the stock would trade at approximately $110 per share.

A company's stock price is determined by simple arithmetic—its market capitalization divided by the number of outstanding shares.

In theory, a stock price can be any value and does not inherently reflect the company's overall worth. However, some academic studies suggest that stocks tend to perform better after a split announcement, indicating that investors perceive management as signaling meaningful information.

This marks Netflix's third stock split. The company previously executed a 7-for-1 split in 2015 and a 2-for-1 split in 2004.

Since its initial public offering (IPO) in 2002, Netflix's stock has surged by over 100,000%.