A Small Bite of Apple and Tesla Ready for Stock Split
Apple and Tesla finally made their appeal to retail.
After a soaring rally of technology stocks since the start of the pandemic, the stock price of the biggest tech firms soars to new highs. This lead to the announcement of a stock split, first by Apple then followed Tesla.
Along with the reports of its bullish quarter earnings, Apple Inc. announced its 4-for-1 stock split happening by the end of August.
iPhone sales for the same period rose to $25.4 billion from analyst modest forecast of $4 billion, making Apple Inc. soar 126% from the same period last year.
For the record, Apple’s last similar offering of stock split was in 2014, when it did a 7-for-1 scheme.
The most influential catalyst of the DJIA will step down from the top after the offering is made. The Dow still sticks to its traditional price-weighting method where share price determines the weight of the stock in the overall index.
Its $452 per share would drop the price to roughly $113 which will land it to the 16th place in the Dow.
With its market value at $1.9 trillion, Apple’s ranking in the S&P 500 will remain the status quo as the index’s gauge remains by market capitalization.
Similarly, Tesla joined the bandwagon announcing a 5-for-1 deal for its stocks this coming August 31. Tesla per stock price currently plays at $1,621.
During the split, per share price will be divided into five, making it just 20% of its current value.
Tesla has a strong retail base and growing appetite among investors. This is driven by strong overall electric vehicle performance in the stock market. Tesla spiked 580% year-to-date.
Stock split is a big deal for the stock market, along with commission-free stock trading that makes investing more affordable. The lower the price of stocks, the better for regular investors.
Will Golden Age of Stock Trading Lead to More Splits?
So far, Apple and Tesla are the only firms that announced their stock-split offerings. But some analysts say that this may be the start of a stock-split fad.
More companies, especially those experiencing exponential growth in recent months, seek to appeal to a wider retail audience.
In the history of stock trading, stock splits were popular with Wall Street investors among publicly traded companies. This is to make the company shares appealing to average purchasers, especially during the dot-com boom.
However, records in recent years do not support this anticipation.
In July 2015, only Netflix followed the generous offering of Apple in 2014, when the movie-streaming platform offered a 7-for-1 split.
So far, there are now 63companies with $250 per stock price point from 44 last year while 14 companies with $500 a share from 10. Investors look forward to stock splits from the NASDAQ’s top performers such as Amazon.com Inc., Alphabet Inc., Netflix, among others.
A major factor that pulls back a company from going in for the move is high administrative cost. For a large company, the expected cost may reach $800,000.
But the value is infinitesimal compared to the long-term yields of the initiative.
Although, analysts warn that buying shares for the sole purpose of joining the split-effect is not an efficient long-term strategy, in all circumstances.
