Why Apple’s 4-for-1 stock split matters

Apple stock, which, after rocketing after a knockout earning report in Thursday after hours trading, is now above $400 a share on Friday morning. The company announced a 4-for-1 stock split “to make the stock more accessible to a broader base of investors.”

The combination of strong results and the stock split sent shares up 6% in after-hours trading. Six percent adds roughly $100 billion to Apple’s market value.

How this AAPL split works: Each Apple shareholder of record at the close of business on August 24, 2020 will receive three additional shares for every share held on the record date, and trading will begin on a split-adjusted basis on August 31, 2020. The dividend per share ($0.82) will also be quartered ($0.205).

Apple's 4-for-1 stock split

Al Root for Barron’s:

Stock splits aren’t supposed to matter to stock market returns—except they kinda do. The reason: $100 is less than $400. Lower prices put shares within reach of more investors… There is something to a stock split. Academic research is littered with papers with titles like “impact of splits on clientele” and “split impact on valuation.”

Fidelity even pioneered a product called “stocks by the slice” for investors looking to buy small stakes in high priced stocks such as Amazon — which is trading for $3,232 Friday morning—for as little as $5.

Fidelity appears to believe the absolute level of a stock price matters.

MacDailyNews Take: Apple’s 4-for-1 stock split matters psychologically. It brings in more retail investors which increases demand which causes the price to rise.

We’ve been through several Apple stock splits and they’ve only made things better. They’ve never hurt.

Apple’s stock has split four times since the company went public. The stock split on a 2-for-1 basis on June 16, 1987, June 21, 2000, and February 28, 2005, and split on a 7-for-1 basis on June 9, 2014.

33 Comments

  1. If you follow EGG trajectories (+-BUN), there’s a hiccup following each split, but overall, AAPL handily beats BACN curves, particularly when factoring in PLUM over 3 to 4 quarters YTD.

  2. For each AAPL share I bought in the early 1990s (and never touched since) I will have 112 shares at the end of August. A few hundred shares have grown to tens of thousands — what an investment! And all just because I was so enthusiastic and thankful being able to start my own little business in 1988 with that single Mac SE (with 9-inch b/w screen).

    1. That’s called bragging… and maybe a little lying too… but certainly bragging…. I think most of us here have had our lives changed by being in on apple very early….

      Shame on you

      1. Just wondering why you automatically assume the OP is lying? I personally know of several people with similar stories. And believe me, back in the day, anyone investing in Apple (or using a Mac instead of a PC, for that matter) was a subject of ridicule. Those of us who hung in there through the ’90s, and resisted the temptation to cash out over the last decade, have been paid handsomely for our loyalty.

      2. Sorry if you see my comment as bragging. It wasn’t meant that way. The nearly three decades of owning Apple stock have also been time and time again a hell of a rollercoaster ride. Especially until 1997 — for reasons most of us here know very well. I was just doing the math this morning and thought it would be an interesting aspect to share. (My first contribution here at MDN after 20 years or so of reading, btw). I just loved that little Mac and thought to myself maybe I can own the doorknob at 1 Infinite Loop. A purely emotional decision by then. Today I just look amazed, stunned and with a big portion of disbelief at what has happened since.

      3. It ain’t bragging if it’s true! And it’s true for me, too. I made a modest buy in 1998. After the upcoming split, I will be able to say I bought AAPL at 29¢ a share! Yes, my faith in this company has been rewarded way beyond what I could have expected at the end of the last century. Perhaps you’re too young to have that kind of perspective. My advice? Stop whining like you’re jealous of other people’s good fortune and take action to help yourself — buy some AAPL stock. You’ll thank yourself over and over again in the years to come.

        1. Yes, in the darkest hours of the company — at the mid to late nineties — that was absolutely possible. I have bought the first batch for 90 DM (Deutsche Mark) a share and few weeks later the same number of shares for 45 DM per share. That equals roughly 0,31 Euro after the upcoming split and also shows the enormous volatility in those days…

    2. My story is similar to dannymuc, though on a smaller scale. I bought AAPL in the 1990’s when they were selling for around $18 a share, and have watched it split several times. I also bought a Mac SE, learned how to use it and launched a Mac-related career for 33 years. Recently retired, I am thankful to AAPL for the financial stability it has created.

      Yes, I’m bragging. No, I’m not lying.

      Shame on anyone who would throw cold water on another’s good fortune.

  3. This is also huge for all Apple employees that participate in the Employee Stock Purchase Plan. Every six months, they will be able purchase 4 times the amount of stock with their discount. It will allow employees to acquire shares even faster! Let it ride!!!

  4. The rich keep getting richer.*

    *and, as an avid AAPL investor, I include myself in that statement. In my case, due to the sheer number of AAPL shares I already own, add “much” between “getting” and “richer.” 🙂

    Imagine now if Apple had an innovator like Steve Jobs at the helm instead of a visionless parts-ordering beancounter from Compaq who likes to appease the CCP and virtue signal endlessly by abusing Apple’s money and brand.

    1. I think there’s a good chance Apple TV would fare better as Steve would be less inclined to front-run Hollywood actors like Jennifer Anniston and Tom Hanks, in favor of more thought provoking and original actors and shows? I have nothing against Tom and Jennifer, btw…but they’re well known quantities.

      After all; “Here’s to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes… the ones who see things differently — they’re not fond of rules…”

  5. The stock split really surprised me after I thought Apple was trying to decrease share count. I’ve heard the reasons for the split but I wonder if it will really lure in new investors due to a lower share price. Hopefully, it won’t be just day traders buying Apple up. I just figured that if Apple is attractive enough, it will be bought at any price (like Amazon). It is what it is and I hope it will be beneficial for Apple and Apple shareholders by boosting Apple’s stock price even more.

  6. One of my questions as well…low share count lost its importance?

    Also, just a general question, why is it a company like AAPL would want to “bring their shares within reach of more investors” and a company like Amazon apparently doesn’t have the concern? Amazon hasn’t split for over 2 decades and a share is $3185…and they’re a consumer company (at least the e-commerce part). Google, at $1470, apparently also doesn’t feel the need. Bershire Hathaway at $292,625, apparently has downvoted a 2500x split to bring share into the same range /s.

    Another rationalization for such a split is liquidity. Apple is in need of liquidity?

    Yesterday I thought it possibly forecasted that Apple leadership believes upcoming announcements (5G iPh, A-Glass, AI, A-Silicon) will all create significant brand awareness and the split price will enable entry and cause notable rise…a very time-specific strategic move. (A non-insider’s pondering).

    1. The split is a huge buy in point I bought in after the 2 for 1 in 2005, and for people that are long Apple has within 2-3 years may have doubled your investment if you stay long.

    2. I think the stock split results from the requirements of the Down Jones. Every single of the 30 stocks has to be within a defined prize range to keep its weight balanced. That also was the reason why Apple had to do the 7-for-1-split prior to entering the Dow.

  7. To have Apple Silicon in the pipeline along with other great things coming up, this split is huge for those who are on board long with shares…incredible……:)

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