“Apple would have to execute one of the largest stock splits on record to lower its share price enough to make the stock more palatable to retail investors,” Vipal Monga writes for The Wall Street Journal.
“For example, if Apple wanted to cut its stock price to roughly $100 a share, it would have to perform a six-for-one split, which would be the third largest on record, according to Standard & Poor’s,” Monga writes. “Only the 10-for-1 splits by Capital Cities/ABC in 1994 and Metromedia in 1983 were larger.”
Read more in the full article here.
MacDailyNews Take: How does making the price more comfortable for less-savvy (and therefore much more fickle) investors help Apple Inc. in the long run? After all, it’s not like they’re under-financed and in need of operating cash.
For those who see the share price as daunting, but still want to get in on Apple: Establish a brokerage account that allows you to buy partial shares and have at it.
Related article:
Analyst: Apple looking at stock split – August 8, 2012
That’s impossible. A split is a split is a split.
The only reason for Apple to split the stock is to get the share price down to a level that Dow Jones may add it to the Dow 30 along with MSFT & INTC. Maybe getting into that index is the possible reason.
The only reason to get into that shitty index is that certain investment firms and mutual funds will be able to add Apple to their portfolios. It may not make enough of a difference to matter, tho.
I hope they don’t do it. Proper take, MDN.
How? The theory is that by putting the stock in the hands of more “mom & pop” investors you increase the number of people holding the stock for the long term and thereby reduce the ability of speculators to manipulate the stock. It should be value neutral, but more stable.
As opposed to a stock buyback, which as Cisco showed, simply destroys value except to speculators who sold during the buyback, or dividends which regularly return value to the owners.
the only two reasons to do a buy-back are to off-set new shares issued to employees through options (preventing dilution), and to take advantage of buying opportunities created by rumour mongering short-sellers (which has the benefit of reducing volatility).
I used to be against a split but I’ve changed my tune. The fact is that weekly option expirations are completely dictating are growth rate. Look at last few months. It’s become relatively simple to predict the Friday closing price. Figure out the max pain number and watch the Big Boys manipulate the share price within pennies of that number. To me, you need a cheaper share price so that the Big Boys aren’t the only ones moving the needle. I think there will be more accountability if the institutions have a small fear that average investors can foil their evil plans.
If you can reliably predict the closing price within pennies every Friday or even once a month you don’t need a split you can get wealthy just trading the stock. Max Pain isn’t reliable. But I do believe a 10 for 1 split will have a stabilizing effect on the stock. Novice investors buy and hold.
Yeah, I have to agree I don’t know anyone who can predict the closing price of any stock on any day let alone a particular stock on a particular day of the week. And REGULARLY! If Pocketrash can do that he/she is the first person in the history of the world to do so. Pocketrash could (and probably does) make as much money as he wants. The sky’s the limit! Wow! Unbelievable! I mean really unbelievable!!!
Exactly right. Max Pain can only “predict” the past. Nobody makes money trying to play it. And even if it were true it certainly wouldn’t affect the long-term prospects.
It would make it easier for retail investors to participate in Apple options.
A stock split is a psychological move. Really the only way to benefit from a stock split is to already be in or buy right at the split, and hope less savvy investors raise the share price.
Neophytes somehow equate a stock split with having an impact on the value of the company.
One more example of the economic doom that we are in for because of the lack of basic economic education in this country.
To answer your question in the ‘take’ MDN, rather than making the price more comfortable for less-savvy (and thus more fickle) investors it would bring AAPL into more indexes.
For example, it could become part of the Dow Jones and if this were the case it would mean that index tracking funds, and all the closet index tracking funds, would have to buy and hold the shares.
Such a move would make the shareholder register more stable … thus the opposite of what you are suggesting.
Only the analysts are talking about a stock split. They are speculating at best or trying to instigate at worst. If/when Apple announces a split, then there will be something to talk about. Until then …. “move along. Nothing to see here.”
MDN’s implication that savvier investors make the stock more stable is, in a word, hilarious.
Do you think it’s the mom and pop investors that dump shares at any little hint of a rumor? Nope, because they wouldn’t even hear of those rumors.
+1
The real reason is that it cost money to perform the split. The industry sees apple as a cash cow and want to milk it.
Whoever gets to execute the split will make quite a bit of money.
I don’t care either way unless the cost is significant.
“After all, it’s not like they’re under-financed and in need of operating cash.”
MDN…Apple doesn’t get any cash when stock changes hands, no matter what the price. The company sells it at IPO or secondary offerings. After that, no cash goes to the company when shares trade.
I guess MDn is the one who needs a bit of education here. Stupid bunch of jokers whiling away time by posting links from the internet and making seemingly intelligent takes without understanding a thing about it….
And you are replying because…?
Apple issues shares to top executives as employee compensation for retention purposes. The performance of the stock very much matters to the company.
Unless you want to argue that the incentive for top executives to remain at the firm is irrelevant to the company.
I just wonder what the nay-sayers of this potential AAPL stock split had to say about the three (3) splits in the past! Were they against them TOO, do you suppose? The truth (undeniable) is that the average investor does not have–nor is willing to set up–“a brokerage account that allows you to buy partial shares . . . .” How do I know this? Because I am the only individual equity share owner in my family and large circle of friends who can/is willing to buy a stock @ $600 per share. Period. Remember, I’m talking about the “average” investor here, the person who is terrified of re-entering the equities market in these volatile times, and not one of the many financial geniuses here and elsewhere who follow such matters.
Having been the benefactor of the three splits of the past (average purchase price $12.40 per 5700 shares) I wholly applaud this rumor and can only trust that it will come to fruition–for the fourth time.
Does that 12.40 per share average include the shares you bought at $600?
The stock market is a game. Perceptions are reality. The current price is daunting. That’s a perception. And it does mean everything. Don’t be upset about a potential split and how meaningless it ought to be. I’ve been in this AAPL game a long time, and I’m ready to play the game of a very big split. Bring it, I say. If Apple keeps its profit trajectory going (with new frontiers in TV, home utilities perhaps, cars, who knows), the new lower price will prove very beneficial to current stockholders.
I would think a 10 for 1 split will enable AAPL to trade at a higher PE ratio.
I agree. The P/E ratio has compressed over the years as the stock has become more and more expensive. I don’t think that is a coincidence.
I strongly disagree. There would be ten times the number of shares, and the value per share would be one tenth of what it is now, so the P/E would not change at all. The large companies, who control about 70% of Apple’s stock are not going to start buying more or fewer shares of AAPL. It’s simplistic and naive to think that a split will cause all these wondrous things to happen to AAPL.
A split would create more interest from retail investors and if institutions wanted to keep their 70% it would absolutely push the PE ratio up. How high is another question but definitely higher barring a macro economic failure.
Agree. Perception is part of the game. I don’t believe it would hurt the stock value.
BTW, I know of at least one much “bigger” stock split than the 10-for-1 cited by the author: BRK-B’s 50-to-1 split in Jan. 2010.
If you can’t afford $620 to invest then you should not be in the market.
I know a dozen people right off the top of my head who would be willing to buy shares at $62 but wouldn’t touch it at $620. That’s just the way it is right or wrong.
Dell would be in their price range or how about Microsoft?
We note your contempt for those less fortunate than yoursekf.
So those little people only deserve to invest in losers?
Dear MND,
I don’t understand why you think small investors are more “Fickle”. Isn’t it the big investors that are behind the manipulating of Apple stock that you so often mention?
I am a small investor. I have had my kids college fund account in Apple. I’m the kind of investor that buys and sits on it.
If you were consistent in your logic against the “fickle” investor you would be rooting for a split so more small investors like me could buy more Apple and sit on it until it is needed.
as a small appl investor the pros and cons take on the split from the various commentators has been educational.
I’m just curious:
if the share goes down to say 100 and lots of people buy one or a few shares does Apple SPEND a lot maintaining them by sending them quarterly reports, annual reports etc ? if like millions buy a one share each how much will apple spend?
I’ve never received anything from AAPL for the five years I’ve owned stock. Although I do hope to hear something from them on August 16th.
RIMM’s been able to reduce it’s share price to a tenth of what it was 18 months ago without issuing any new stock, beat that!
I’m for a stock split as long as it stops Apple from being manipulated so easily by the hedge funds. Anything to make it harder for them. Those guys care nothing about companies and only use the stock market to make money exclusively for themselves. I think those types of market players only damage companies and hurt the economy. Chances are the smaller shareholders won’t allow Apple to be as volatile as it is based on daily unconfirmed rumors. There won’t be that mass selling in concert using automatic computer selling. I say, buy a stock from a good company and you sit on it for months if not years. This buying and selling of a company’s stock on a daily basis is just nuts.
Why would Apple buy back 10 billion dollars worth of its own shares and then split. The buy back is offical, the split is market manipulation. Apple WILL NOT SPLIT.
Bring in little retail investors would stablize the price. Right now the majority of shares are held by large brokerages, pension funds etc… One of them selling off kills the stock price. Diluting the stock to many retail investors stops the huge variations. There is nearly an $80 up and down change over the last couple of months due to industrial trading. Over the last couple of months the changes should have been more like $10, Apple needs to split and stabilize.
I agree and I think the dividend has also had a stabilizing effect. This recent fall to $570 after the earnings miss would have been greater and longer without the dividend. But a split would have a even greater effect.
Apple reasons for a 10-1 split are unique, and compelling and outside conventional concerns.
Every Apple purchaser is a uniquely enthusiastic purchaser who thinks the whole world will want to buy the super neat stuff that now delights.
Apple’s enthusiasti customers will be the ones who will want to be able to buy its shares for themselves or their kids. They will understand that Apple is going to grow big time, and want to be part of it if they could.
Buyers of Cisco stock have no experience of delight available to them in purchasing and handling their stuff. this wouldn’t work for Cisco.
But if every Apple store had a counter spot where roving shoppers could buy shares of Apple ( or a kiosk for Scottrade) the response would be enormous. $60.stock would soon go to $70 and $80. – still Apple customers will broaden the shareholder base big time. And hopefully dampen the hedge fund wanton manipulation.
Scott Wray