Generally, yes. Most companies will go through splits long before that, turning every share outstanding into two or more shares (usually with half the value) on a predetermined date. Having a very high stock price is actually kind of inconvenient, as it makes it hard for random day traders to afford.
Day 0: Company trading for $1/share with 100 outstanding shares -- Market cap = $100. They are offering $0.05/share dividends -- Total dividend = $5
Day 1: Stock split at 5:1
Day 2: Company trading for $0.20/share with 500 outstanding shares -- Market cap = $100. They are offering $0.01/share dividends -- Total dividend = $5
Yes. Basically, a stock split changes nothing about the value of the stock. However, it might lead to a slight rise in the stock price since small investors will now find it easier to buy, and so total demand for the stock might be a bit higher.
Well sure, if you don't have enough to add up to a share every month then you won't get a share every month. If the price continues to rise and there's no stock split that will probably become more likely in the future.
It's not really a stock split (where you get multiple shares for the same company) but a company split. If a company splits itself into two parts (e.g. Amazon to be split into retail and AWS) they can distribute shares of both new companies to the shareholders of the old company. In that situation you have the same problem. If the new AWS shares are not traded and you were short Amazon, you would have to cover AWS shares and therefore buy them.
In reality it's not an issue with large companies because it happens rarely and there are so many shareholders that a market would appear quickly.
To make it affordable and easier for more people to buy their stock. This is always the biggest reason for split. Will an average person invest in a stock which is trading at $2k per share? Nope.
Splits don't change the value of the stock. If there's a 2:1 split, the market cap stays the same so the share price halves. It's just a way lower the price of individual shares.
A split has absolutely zero impact on the worth of your shares. The primary reason companies do it is to attract investors who are more comfortable paying lower prices for the shares, thus increasing demand and driving a higher price.
The whole notion of individual shares with prices is legacy baggage from decades ago when trading was done with paper stock certificates. What really matters is the percentage of the company you own, regardless of how that percentage is sliced into units. Some retail brokerages already offer fractional share tracing so for those investors a stock split is mostly irrelevant.
And then if the stock price goes astronomically high for some reason, they split it, double the amount available and then sell it back out, generating money out of thin air.
Yeah, but each share is valued at a fraction of a cent. The company will have to cut a check for a few dollars. (Happy to explain more if you’re interested!)
I don't think this is possible? You can do a stock split but existing shareholders automatically get an increased amount of stocks so they don't lose any value. GME actually did this in the summer so every shareholder got 4 stocks for every one they previously had.
If you could just issue additional shares willy nilly without adjusting the shares of existing shareholders everyone would take their money out of your company and no-one would put any into it because you'd have devalued the original shareholders investments overnight and subsequently you'd no longer be trusted. You would be bankrupting your company.
I doubt it, and I think there is a misunderstanding about the investors Apple referred to in their public statement on the split. As a company's share price rises the stock becomes less liquid, because trades happen in smaller quantities; Berkshire Hathaway's class A shares are probably the most extreme example. Low liquidity is a problem for mutual funds, which have to sell assets whenever an investors sells their shares in the fund (which may be a relatively small sale e.g. a retirement account distribution), because low liquidity makes asset sales more difficult. In general institutional investors will have liquidity rules that constrain the assets their funds can hold to avoid that kind of problem.
Given how much investment capital is held by institutional investors, companies have a good reason to split their shares if the share price is too high. Berkshire Hathaway created a new share class to support the needs of institutional investors, and I would read "accessible to investors" as "conforming to the liquidity requirements of institutional investors."
This is correct. To add to this, you will sometimes see companies attempt to avoid delisting by reverse stock splits (e.g., 10 old shares become 1 new share).
The company purchases the shares from the market so you don't have to sell.
What if a company buys back 50% of the shares and simultaneously performs a 1:2 stock split so that there are exactly the same number of shares available?
Can somebody educate my the benefits of a stock split?
In case of Amazon, they don't seem to mind the high stock price. Also, many trading platforms nowadays allow fractional shares (though you don't get the same voting rights with fractional shares).
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