Analysis of Companies that Have Recently Executed a Stock Split in Finance
Stock splits are a common practice in the world of finance, often undertaken by companies to increase the liquidity and attractiveness of their stock. A stock split is a process that involves dividing the existing shares of a company into a higher number of shares, while keeping the total value of the shares unchanged. This essentially means that the value of an individual share decreases, making it more affordable for investors. In recent times, we have seen several companies execute stock splits, let us dive into the reasons and the impact of these decisions.
Apple Inc.
In August 2020, tech giant Apple Inc. announced a 4-for-1 stock split. This means for every one share an investor owned, they would now own four shares, with each share being a quarter of the original value. The main reason behind this decision was to make its stock more accessible to a wider range of investors. With its soaring stock price, which crossed the $2 trillion mark in August, Apple wanted to attract smaller investors and increase liquidity in its stock.
The impact of this decision was visible almost immediately, as the stock price surged to a new high. The split also made Apple’s stock more affordable for retail investors, encouraging more people to invest in the company. This move was also perceived as a sign of confidence in the company’s future growth prospects.
Tesla Inc.
In September 2020, electric vehicle giant Tesla Inc. announced a massive 5-for-1 stock split. The electric car company’s stock had surged over 400% since the beginning of the year, resulting in its stock price crossing the $2,000 mark. Similar to Apple, the main reason behind this decision was to make Tesla’s shares more affordable to a larger audience of retail investors.
The impact of this decision was also immediate, with Tesla’s stock price jumping by over 12% the day after the announcement. The split has also made Tesla’s stock more attractive to investors, who are now able to purchase smaller parcels of the stock, which was previously out of reach for many due to its high price.
NVIDIA Corporation
In July 2021, technology company NVIDIA Corporation announced a 4-for-1 stock split. The main reason behind this decision was to make its shares more affordable after the stock price had risen by over 100% in the last year. NVIDIA’s stock price had crossed $800, making it one of the most expensive stocks on the market.
The split had an immediate positive impact, with the stock price jumping by 4% the day after the announcement. The split has also made NVIDIA’s stock more attractive to retail investors, as it has become more accessible due to the lower share price.
Microsoft Corporation
In April 2021, software giant Microsoft Corporation announced a 7-for-1 stock split, making it the largest split in company history. The primary reason behind this decision was to increase liquidity and make the stock more attractive to investors. Microsoft’s stock had been on a steady rise, crossing the $260 mark in April.
The split had an immediate impact, with the stock price surging to a new all-time high. It also made Microsoft’s stock more appealing to a wider range of investors, as it became more affordable and accessible.
The Benefits of Stock Splits
Companies that execute stock splits typically see a surge in their stock price immediately after the announcement. This can be attributed to the increased demand for the stock due to its lower price and increased liquidity. Additionally, a lower stock price makes it more accessible to retail investors, leading to a broader investor base.
Stock splits also give the perception of confidence and growth in a company. It signals to the market that the company’s management believes in the future prospects of the company and is confident in its growth potential. This can attract more investors and positively impact the company’s stock price.
Conclusion
In summary, stock splits are a common practice used by companies to attract more investors and increase the liquidity of their stock. Apple, Tesla, NVIDIA, and Microsoft are just a few examples of companies that have recently executed stock splits, with the aim of making their stock more affordable and attractive to investors. The immediate impact of these stock splits has been positive, with a surge in the share price and increased accessibility for retail investors. Stock splits are just one of the many strategies companies use to drive growth and increase value for their shareholders.