Apple Cut into Fours
Apple is in the news for a 4-to-1 stock split!
The stock split phenomenon is dead simple; a business decides to change its denominating share count. It decides to split the value of one share among four (as in Apple’s case), so if you own one share pre-split, you’ll have four shares post-split. It’s a “scrip issue” in the UK.
You don’t need to do anything – okay, that’s all you need to leave here knowing. If a stock splits into two, four, eight, ten, or even if it reverse splits, it’s your broker’s problem. You’ll login to find your returns unchanged, because the underlying business itself is unchanged.
If a stock splits, it because it’s been performing well. It’s gotten so expensive that new investors can’t afford it in big blocks, so the split is necessary to make the stock more investable. If there were less possible traders in the market, there’d be less trades, and bid-ask spreads on the stock would widen for everyone. If the stock is more liquid, we all win!
The Apple is being sliced into four on August 31st, shares going from around four hundred dollars to a more palatable one hundred (4-1 split). It did something like this in 2014. Its shares went from over six hundred dollars to just $92 (7-1 split).
If Apple was reverse splitting shares, 1-7 or 1-4, it would still be trying to make them more investable, but only because they were so cheap before that nobody trusted them or delisting from an exchange as being threatened.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.