- Posted July 8, 2014 by
What Apple's stock split means for you?!
But to understand correctly their decision it's better to understand what is stock split. Stock split is a process when a company increases the number of shares outstanding while lowering the price accordingly. Splits don’t change anything fundamentally about a company or its valuation, but they tend to make a company’s stock more attractive to mom-and-pop investors. Apple shares rallied 23% from late April, when the company announced the split in conjunction with a strong quarterly report, through Friday. A poll conducted by our colleagues at MarketWatch found 50% of respondents said they would buy Apple shares after the split. Some 31% said they already owned the stock and 19% said they wouldn’t buy it. The survey received more than 20,000 responses.
But here is another things you need to know about apple stock split:
1) WHO DOES THE STOCK SPLIT IMPACT? Investors who owned Apple shares as of June 2 qualify for the stock split, meaning they get six additional shares for every share held. So if an investor held one Apple share, that person would now hold a total of seven shares. Apple also previously paid a dividend of $3.29, which now translates into a new quarterly dividend of $0.47 per share.
2) WHY IS APPLE DOING THIS? The iPhone and iPad maker says it is trying to attract a wider audience. “We’re taking this action to make Apple stock more accessible to a larger number of investors,” Apple CEO Tim Cook said in April. But the comment also marked an about-face from two years earlier.
3) WILL APPLE GET ADDED TO THE DOW? It’s unclear at the moment, although a smaller stock price certainly makes Apple a more attractive candidate to get added to blue-chip Dow. Apple, the biggest U.S. company by market capitalization, has never been part of the historic 30-stock index, a factor that many observers attributed to its high stock price. The Dow is a price-weighted measure, meaning the bigger the stock price, the larger the sway for a particular component.
4) WHAT IF APPLE NEVER SPLIT ITS STOCK? Apple has now split its stock four times throughout its history. It previously conducted 2-for-1 splits on three separate occasions: February 2005, June 2000 and June 1987. According to some back-of-the-envelop math by S&P’s Howard Silverblatt, if Apple never split its stock, you’d have eight shares for each original one prior to the most recent split. So Friday’s $645.57 closing level would translate to $5164.56 unadjusted for splits.
What is important about Apple's case is that their stocks traded as AAPL on Nasdaq and also they have strong communication with Nasdaq-100 component and S&P 500 component. This is main reason why it's better to think before investing in Apple stocks, but commonly this stock has huge potential before the next stock split.
Chief Executive Officer
I.B. Capital Management