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).
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.