Split Frenzy 🤑

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Split Frenzy

The motivation behind stock splits has slowly been changing in recent years, which could have monumental impacts on how the stock market operates and who truly is in control. If it isn’t obvious, the number of small fish in the stock market have risen exponentially. This is due to the COVID-19 pandemic, which coincided with easier access to brokerage services and the release of stimulus checks to citizens, giving them money to place in the stock market.

Companies are noticing this, and their stock prices no longer look appealing. Buying 1 share of Amazon stock is likely taking up a chunk of your account that is super inconvenient. However, stock splits solve that problem by applying a ratio to the amount of outstanding shares, decreasing the value of each share, and lowering the stock price while holding the same fundamental value.

In this age, businesses are using stock splits not to increase accessibility to funds, but retail investors instead. Alphabet and Amazon are about to undergo 20:1 stock split, dividing their share value by 20 to land in the region of 100 dollars. Data shows that stocks who undergo splits rise by a lot in the following days for obvious reasons due to retail volume being one of the major factors. This is set to create waves of stock splits in the markets with companies like Booking Holdings and ServiceNow looking like appealing candidates, and it all boils down to the new power of retail investors.

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.

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