Why do you want a stock split? It won't change anything.
Untrue.
$300 will not buy you a share of a $301-priced stock, but it will buy you a lot of $30 shares. Stock splits increase liquidity and results in increased trade activity. This makes the stock more attractive to index funds and institutional investors.
This is one reason why Warren Buffett endorsed and got a 50-to-1 split of Class B shares of Berkshire Hathaway. (The other reason was purportedly to get Burlington Northern shareholders a stake in the company.) Because of the split and increase in liquidity, Berkshire Hathaway was added to the S&P 500 (and thus a slew of index funds).
The market capitalization indeed remains the same after a split, but the stock is not the same.
The remarkable thing is that Apple has achieved this great success in the worst recession in 80 years. And they've achieved it in spite of the fact that they are frequently perceived as being overpriced. Even though I'm a fan of the company and have owned the stock on and off for years, even I thought that Apple was going to suffer big time during the recession.
We can all (except for the fanboys) claim that Apple makes a lot of bad decisions or has a bad attitude. But the fact is that they've been firing on all cylinders for a very long time in ways that virtually no other company has been able to achieve.
The question for the future is whether their arrogance will eventually harm them and whether they can stay far enough ahead of the pack as other companies have been able to copy/emulate their technology faster and faster. It makes me laugh when the UI on almost every other smartphone looks like a copy of the iPhone.
You do realize that for every share purchased, that share is also sold, right? So one person buying a share doesn't increase the amount of shares held by people.
I repeat my point again and again ... a stock split helps boost demand.
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"A stock split is usually done by companies that have seen their share price increase to levels that are either too high or are beyond the price levels of similar companies in their sector. The primary motive is to make shares seem more affordable to small investors even though the underlying value of the company has not changed.
A stock split can also result in a stock price increase following the decrease immediately after the split. Since many small investors think the stock is now more affordable and buy the stock, they end up boosting demand and drive up prices. Another reason for the price increase is that a stock split provides a signal to the market that the company's share price has been increasing and people assume this growth will continue in the future, and again, lift demand and prices."
Some companies like to keep their share prices within a certain price range and will split the stock to so. They will also do a reverse split and combine shares to raise the share price. Companies like at&t have traditionally kept their share prices within a range that makes it possible for the small investor to buy in. A lot of trading houses won't take an order for less than 100 shares so you'd need $30,000 to buy into Apple right now. On the other end of the spectrum you have Berkshire/Hathaway trading today at $125,000.00 per share! So there are many reason for a company to split or combine shares, or not.
That is what I was getting at with my query. it doesn?t change the value of the stock you own in and of itself, but for some reason this seems to get interpreted as it has no benefit at all.
We can all (except for the fanboys) claim that Apple makes a lot of bad decisions or has a bad attitude.
The question for the future is whether their arrogance will eventually harm them and whether they can stay far enough ahead of the pack as other companies have been able to copy/emulate their technology faster and faster.
No. "We" can't "all" say that without being labeled a"fanboy". How arrogant of you.
By definition if Apple is where it is today it's because since Steve came back they have not made "a lot of bad decisions".
Apple doesn't have a bad attitude and is not arrogant, they are just confident in their views and strategies. That's a big difference. And obviously given where they are, they are right on the mark.
The price per stock is arbitrary, so a stock split is as meaningless as the fact that it "broke $300" for the first time in the company's history. Apple could have done a 1-to-100 reverse split ten years ago and had a stock price in the stratosphere. Who cares?
The interesting thing is their total valuation continues to climb and is STILL seen as undervalued by most analysts.
It is not 'arbitrary' when benchmarked appropriately. Against, say, the $10 (or so) that it was a decade ago. There's huge information content in a statement such as "It trades for $300 now v. $10 ten yeas ago".
They allow broader ownership of a stock - if every share cost $10,000 no one could buy it. But splitting a stock from $300 to $150 only means an average person will buy 10 instead of 5 shares. No difference.
I think its really only an issue for small investors who want to get small lots, and can't get even one share at tremendously high prices.
That is what I was getting at with my query. it doesn’t change the value of the stock you own in and of itself, but for some reason this seems to get interpreted as it has no benefit at all.
It is amazing, a quick scan of many Apple blogs and all are having the exact same argument ...
Team A: It is mathematically the same ... no point ... doesn't change anything.
Team B: Many, many examples of actual stock splits showing huge gains in buying interest and positive results.
Team A seems fixated on a simple arithmetical argument which is not actually connected to the reality of the specific discussion, i.e. 2 x $5 = $10 so it is pointless.
Comments
Why do you want a stock split? It won't change anything.
Untrue.
$300 will not buy you a share of a $301-priced stock, but it will buy you a lot of $30 shares. Stock splits increase liquidity and results in increased trade activity. This makes the stock more attractive to index funds and institutional investors.
This is one reason why Warren Buffett endorsed and got a 50-to-1 split of Class B shares of Berkshire Hathaway. (The other reason was purportedly to get Burlington Northern shareholders a stake in the company.) Because of the split and increase in liquidity, Berkshire Hathaway was added to the S&P 500 (and thus a slew of index funds).
The market capitalization indeed remains the same after a split, but the stock is not the same.
We can all (except for the fanboys) claim that Apple makes a lot of bad decisions or has a bad attitude. But the fact is that they've been firing on all cylinders for a very long time in ways that virtually no other company has been able to achieve.
The question for the future is whether their arrogance will eventually harm them and whether they can stay far enough ahead of the pack as other companies have been able to copy/emulate their technology faster and faster. It makes me laugh when the UI on almost every other smartphone looks like a copy of the iPhone.
You do realize that for every share purchased, that share is also sold, right? So one person buying a share doesn't increase the amount of shares held by people.
I repeat my point again and again ... a stock split helps boost demand.
"A stock split is usually done by companies that have seen their share price increase to levels that are either too high or are beyond the price levels of similar companies in their sector. The primary motive is to make shares seem more affordable to small investors even though the underlying value of the company has not changed.
A stock split can also result in a stock price increase following the decrease immediately after the split. Since many small investors think the stock is now more affordable and buy the stock, they end up boosting demand and drive up prices. Another reason for the price increase is that a stock split provides a signal to the market that the company's share price has been increasing and people assume this growth will continue in the future, and again, lift demand and prices."
From Investopedia web site.
I shall now quietly weep as I contemplate the 1,000 shares of Apple stock that I sold at 27...pre-split.
It took a lot of guts to admit that... but I still couldn't help but laugh out loud when I read it. Sorry.
And I wouldn't mind a split since it would allow for more flexibility in buying and selling shares.
I shall now quietly weep as I contemplate the 1,000 shares of Apple stock that I sold at 27...pre-split.
OMG
Just kidding.. I bought at 37 grrrrr.
Imagine if we were in a good economy...
It is so often stated because inevitably someone else will come and say "it is known that it boosts sales of stocks" which is total BS.
LOL, you don't give in easily do you. The facts seem to disagree with you.
edit: Pipped by several posters.
So now we have a bumpy, up and down ride to 400. What's your best guess... 12 months?
If stock splits do nothing then why do they exist in the first place?
There are lots of things that exist which are 'neutral mutations.'
For example, two $5 bills as well as a $10 bill! Or, my appendix.
Some companies like to keep their share prices within a certain price range and will split the stock to so. They will also do a reverse split and combine shares to raise the share price. Companies like at&t have traditionally kept their share prices within a range that makes it possible for the small investor to buy in. A lot of trading houses won't take an order for less than 100 shares so you'd need $30,000 to buy into Apple right now. On the other end of the spectrum you have Berkshire/Hathaway trading today at $125,000.00 per share! So there are many reason for a company to split or combine shares, or not.
That is what I was getting at with my query. it doesn?t change the value of the stock you own in and of itself, but for some reason this seems to get interpreted as it has no benefit at all.
We're not the cool guys anymore... you realize that, right?
Speak for yourself.
Personally I don't think there's much cooler than success.
We can all (except for the fanboys) claim that Apple makes a lot of bad decisions or has a bad attitude.
The question for the future is whether their arrogance will eventually harm them and whether they can stay far enough ahead of the pack as other companies have been able to copy/emulate their technology faster and faster.
No. "We" can't "all" say that without being labeled a"fanboy". How arrogant of you.
By definition if Apple is where it is today it's because since Steve came back they have not made "a lot of bad decisions".
Apple doesn't have a bad attitude and is not arrogant, they are just confident in their views and strategies. That's a big difference. And obviously given where they are, they are right on the mark.
The price per stock is arbitrary, so a stock split is as meaningless as the fact that it "broke $300" for the first time in the company's history. Apple could have done a 1-to-100 reverse split ten years ago and had a stock price in the stratosphere. Who cares?
The interesting thing is their total valuation continues to climb and is STILL seen as undervalued by most analysts.
It is not 'arbitrary' when benchmarked appropriately. Against, say, the $10 (or so) that it was a decade ago. There's huge information content in a statement such as "It trades for $300 now v. $10 ten yeas ago".
Speak for yourself.
Personally I don't think there's much cooler than success.
Thanks to Apple i can afford to pay people to tell me how cool I am.
They allow broader ownership of a stock - if every share cost $10,000 no one could buy it. But splitting a stock from $300 to $150 only means an average person will buy 10 instead of 5 shares. No difference.
I think its really only an issue for small investors who want to get small lots, and can't get even one share at tremendously high prices.
That is what I was getting at with my query. it doesn’t change the value of the stock you own in and of itself, but for some reason this seems to get interpreted as it has no benefit at all.
It is amazing, a quick scan of many Apple blogs and all are having the exact same argument ...
Team A: It is mathematically the same ... no point ... doesn't change anything.
Team B: Many, many examples of actual stock splits showing huge gains in buying interest and positive results.
Team A seems fixated on a simple arithmetical argument which is not actually connected to the reality of the specific discussion, i.e. 2 x $5 = $10 so it is pointless.
Congrats Apple!
Imagine if we were in a good economy...
One could actually make the case that in a bad economy, there's more of a flight to quality.
Who knows.