Today’s stock splits - AAPL & TSLA

FastEddieB

FastEddieB

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Fast Eddie B
Today is the first day of trading post-split for these stocks.

If you own AAPL, you now own 4x the shares you owned Friday, albeit with each share worth 1/4 Friday’s close. Similarly with TSLA, but with 5x the shares worth 1/5 Friday’s close each.

In theory, it’s a push. But individual shares of these stocks are now more affordable. Much less of an issue now than in the past, since commissions are so low and “round lot” trades of 100 shares no longer get reduced commissions. I read somewhere if AAPL had never split over its history, a single share would now trade at over $20,000!

Anyway, should be interesting to watch, especially if you have positions in either. And I do!
 
FastEddieB said:
I read somewhere if AAPL had never split over its history, a single share would now trade at over $20,000!
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Amazon has cumulative splits of about x12 (2:1, 3:1, 2:1). Current stock price, $3,400. Over $40,000, nominally.

Ron Wanttaja
 
I never understood why stock splits were thought to spur buying -- are there masses of people on the sidelines who were $5 short for that single share? Or is this some effect of rounding that accumulates with time and results in fractionally more shares being purchased by the algos/funds when they balance portfolios?
 
schmookeeg said:
I never understood why stock splits were thought to spur buying -- are there masses of people on the sidelines who were $5 short for that single share? Or is this some effect of rounding that accumulates with time and results in fractionally more shares being purchased by the algos/funds when they balance portfolios?
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Well, there is BRK-A as an example...
 
schmookeeg said:
I never understood why stock splits were thought to spur buying -- are there masses of people on the sidelines who were $5 short for that single share?
Click to expand...

Case in point...

We’ve bought a few shares of TSLA for each of our 3 grandkids. Easy to do back when shares were about $350/share. Harder at $2,000/share. Probably an edge case, but I doubt we’re alone.
 
schmookeeg said:
I never understood why stock splits were thought to spur buying -- are there masses of people on the sidelines who were $5 short for that single share? Or is this some effect of rounding that accumulates with time and results in fractionally more shares being purchased by the algos/funds when they balance portfolios?
Click to expand...
Well there's also the case where you're trying to run a balanced portfolio. Suppose you need to buy a basket of stocks where each position is worth no more than $1000. If pre-split the stock price was $504/share then you'd only be able to buy $504 worth of AAPL. Post-split you can buy $882.

But a friend of mind has a term for people that buy solely on the basis of a split: splitiots
 
FastEddieB said:
Today is the first day of trading post-split for these stocks.

If you own AAPL, you now own 4x the shares you owned Friday, albeit with each share worth 1/4 Friday’s close. Similarly with TSLA, but with 5x the shares worth 1/5 Friday’s close each.

In theory, it’s a push. But individual shares of these stocks are now more affordable. Much less of an issue now than in the past, since commissions are so low and “round lot” trades of 100 shares no longer get reduced commissions. I read somewhere if AAPL had never split over its history, a single share would now trade at over $20,000!

Anyway, should be interesting to watch, especially if you have positions in either. And I do!
Click to expand...
More like $200,000 on apple.
 
Original AAPL price was $22/share.
3 splits @ 2-1
1 split @ 7-1
1 split @ 4-1
So that 1 share would be 224 shares today.
Currently at almost $131.
 
Many years ago, the cost of some individual stocks was high enough to discourage individual investors. Someone with a few thousand to invest might not want to sink it all into one or two stocks, and less expensive stocks would allow greater diversification. Following a split there was often a jump in price as people bought the more affordable shares

Today, though, so much stock is held by institutional investors and by funds, I don't know how much effect a split still has. It will be interesting to watch what happens. From the sidelines, for me; I'm pretty much a funds-only investor.
 
Stock splits are so shareholders can vote. Most stockbrokers will not let you voice your opinion in shareholders meetings if you have just a fraction of a share. Harder to get a full share at 2.5 k than at 400-600 bucks.
And yes the irrational rise on a split has all to do with the perception of a "cheaper stock" which isn't the case. People think psychologically easier to go from 420 to 500 than from 2500 to 3000. And yes I said 420 since Elon mentioned it once...
But like wall street said you don't need to be right, you just need to make money!
Made 1.5% on TSLA btw... brought at 475 and sold at 480 during a small upswing. Daytrading is fun.
 
Nobody who owns a fractional share the wants to go to a shareholder meeting...
 
Don’t discount the fact that people a cheap individual stock price with a good value.
 
“Value” is all about the P/E ratio and other metrics that have nothing to do with the dollar price of 1 share.
 
dans2992 said:
“Value” is all about the P/E ratio and other metrics that have nothing to do with the dollar price of 1 share.
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And sometimes it is all hype. Kodak anyone?
 
schmookeeg said:
I never understood why stock splits were thought to spur buying -- are there masses of people on the sidelines who were $5 short for that single share? Or is this some effect of rounding that accumulates with time and results in fractionally more shares being purchased by the algos/funds when they balance portfolios?
Click to expand...

Splits are good for Options traders. A single Options contract equals 100 shares.
An At-The-Money Contract for Sept 4 will run you $250 right now. Multiply that by 4 (pre-split) and it gets cost prohibitive quickly. Basically AAPL just made their stock more available to the public.
 
Given the above, I wonder why more companies don't split their stock down to 1 or 10 bucks a share.
 
schmookeeg said:
Given the above, I wonder why more companies don't split their stock down to 1 or 10 bucks a share.
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As I recall, listing rules say it's gotta be above some dollar threshold. Companies want a bit of cushion on top of that as well.
 
asicer said:
As I recall, listing rules say it's gotta be above some dollar threshold. Companies want a bit of cushion on top of that as well.
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That, and you don’t want the price to get so low if it takes a dive. A really low stock price doesn’t look good either.
 
schmookeeg said:
Given the above, I wonder why more companies don't split their stock down to 1 or 10 bucks a share.
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LUV has split a bunch of times because Kelleher always wanted to keep it in a range where employees could buy a lot of it.
 
dans2992 said:
“Value” is all about the P/E ratio and other metrics that have nothing to do with the dollar price of 1 share.
Click to expand...

and price is all about supply and demand. Value is a part of demand, but so is accessibility. Lower price makes more people comfortable buying a stock, so demand goes up and price rises. That is Econ 101.
 
The unwise wisdom of avoiding high priced stock. Years ago, I had $2,000 to invest, and BRK was $1,000. The disadvantage of buying it, if I needed some money from my stock account, I would have to sell $1,000 worth, there were no fractional shares.

I wanted the BRK, but bought larger numbers of lesser shares.

Biggest investing mistake I ever made. Current quote for BRK/A is $327,360.

When the BRK/B was created by Warren, I bought some of that, and am happy with my "cheap" BRK, now trading at $218.

I never needed to take money out of that account, those 2 shares of BRK/A would be nice to have today. And they would dwarf the stock I did buy!
 
It can always be different this time, but historically, soon after a stock splits, the market value of the company (NAV * number of outstanding shares) usually drops precipitously. Except for one stock, which is more like a high-tech holding company, I mostly only own ETFs and CEFs. Easier and cheaper to get diversification, as well as to own parts of many market segment.

I worked for Textron at their Cessna division. They (illegally) gave us Textron stock as their match to our contribution. I wasn't there long enough for my shares to vest, but when they split the stock, it wasn't long before the company valuation tanked.

I have no idea of the cause of this phenomena.

Of course, the stock eventually recovers; otherwise they would split once and be done.

I was a victim of my own impatience when I first started investing. My first IRA purchase was 100 shares of MSFT, IPO. I sold them the same year for a small profit, unfortunately.
 
eman1200 said:
HOLY @#$%^! there is a company called eMagin...............stock ticker EMAN. so yeah, I bought some.
Click to expand...

eman1200 is up over 18% on EMAN after only 3 weeks!! I see a new TBM in my future!
 
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