An investor who owned 1,000 shares of the stock pre-split would have owned 4,000 shares post-split. Apple’s outstanding shares increased to over 15 billion, while the market capitalization continued to fluctuate, rising to over $3 trillion in September 2024. In addition, in an era of fractional share investing, when investors can buy partial shares, the practical benefits of stock splits for increasing accessibility have been reduced.
More Stock Split Resources from MarketBeat
You can read more about our editorial guidelines and our products and services review methodology. None of these reasons or potential effects agree with financial theory, however. Splits are a good demonstration of how corporate actions and investor behavior don’t always fall in line with financial theory.
Calculating the Stock Splits in a Company’s History
We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. household employment taxes You can learn more about GOBankingRates’ processes and standards in our editorial policy. Experts caution against basing investment decisions on a stock split rather than the financial health of the company. First, splits make company stock more affordable to everyday investors by reducing the price of an individual share. GOBankingRates’ editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services – our reviews and ratings are not influenced by advertisers.
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They tend to occur because companies believe their stock price is too low. Dividing the number of shares that stockholders own will proportionately raise the market price. Companies that perform this tactic are often smaller entities that trade in over-the-counter markets rather than on the major U.S. stock exchanges.
How Does a Stock Split Affect You?
Apple’s outstanding shares increased from 861 million to 6 billion shares. However, the market capitalization of the company remained largely unchanged at $556 billion. The day after the stock split, the price had increased to a high of $95.05 to reflect the increased demand from the lower stock price. A stock split can make the shares seem more affordable, even though the underlying value of the company has not changed. The split increases the number of shares outstanding, but the company’s overall value does not change. Immediately following the split the share price will proportionately adjust downward to reflect the company’s market capitalization.
For the first quarter, revenue of $1.38 billion grew 8% year over year. At the same time, the company’s net loss of $158 million surged 136%, a curious development for a mature company. This is particularly concerning since it resulted from selling, general, and administrative expenses that outstripped GameStop’s gross profit. Even more troubling is the company’s cash burn, which increased nearly 10-fold year over year to $314.7 million. how to void a check If the company opts for a 2-for-1 stock split, the company would grant you an additional share, but each share would be valued at half the amount of the original. After the split, your two shares would be worth the same as the one share you started with.
- Existing shareholders were also given six additional shares for each share they owned prior to the stock split.
- Here are a couple of other stock splits that attracted a lot of attention.
- It may provide a clearer understanding if we add some numbers to the equation to put this in context.
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It seems to have worked out — Booking Holdings closed at $3,500 on March 12. The previous example of XYZ Corp. represents a 2-for-1 stock split — shareholders ended up with two shares worth half as much for every one that they owned before the split. For example, suppose XYZ Corp.’s stock is selling at $1,000 per share. The company thinks that’s too pricey, so the board approves a 2-for-1 stock split.
A 3-for-1 stock split means that for every share an investor has, they will now have three shares. The combined value of those three shares would equal the value of what one share used to be. For example, if a stock was valued at $15 and there was a 3-for-1 split, each share would now be worth $5. Stock splits can be good for investors because they make a stock’s price more affordable, allowing some investors who were priced out before to buy the stock now. For current holders, it’s good to hold more shares of a company but the value doesn’t change.
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The newly minted stock will be distributed at some point after the close of business on July 21, and the stock will begin trading on a split-adjusted basis the following day. Though the split reduced the number of its shares outstanding from 29 billion to 2.9 billion shares, the market capitalization of the company stayed the same (at approximately $131 billion). In May 2011, Citigroup reverse split its shares one-for-10 in an effort to reduce its share volatility and discourage speculator trading.
It may provide a clearer understanding if we add some numbers to the equation to put this in context. For each share of GameStop stock an investor currently owns — recently trading for about $130 per share — after the split, shareholders will own four shares of stock valued at roughly $32.50 each. In the case of a short investor, prior to the split, they owe 100 shares to the lender.
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While none of these suggest entirely rational decisions by traders, a more prosaic and far less flattering depiction of investors is just that they don’t do math well. For this reason, some may struggle to adjust their valuation models properly for the new share structure enough to produce the anomaly. © 2024 Market data provided is at least 10-minutes delayed and hosted by Barchart Solutions. Information is provided ‘as-is’ and solely for informational purposes, not for trading purposes or advice, and is delayed. To see all exchange delays and terms of use please see Barchart’s disclaimer.
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