Apple (AAPL) Announces a 4:1 Stock Split! (wait, so what?)

in LeoFinance2 months ago

ARE YOU READY?? What if I told you of a stock that was about to give you 3 extra shares for every one that you have? What if this company was THE LARGEST company in the world on the basis of market capitalization??

Let's go..... APPLE!!!! (AAPL)

So if you missed out on the big news, Apple just announced a 4-for-1 stock split. You can read more about it here:
https://www.cnbc.com/2020/07/30/apple-stock-split-announced.html

That's great. Or is it?

Let's remember what the intention of a stock split was originally meant to do. One the one hand, a stock split provides no real benefit to the share price because everyone's shares are proportionally increased meaning no one's ownership changes. So why do it?

Historically, stock splits were intended to allow greater access to become part of the shareholder base. Specifically, for those unable to afford a single share of a high-priced company stock. A long time ago, shares used to be purchased in lots of 100, but in recent years this has by and large been reduced to single shares. More recently, fractional ownership has now allowed stocks to be purchased in increasingly reduced amounts negating basically any value in a stock split itself.

Why split the stock if you can own 0.12345 shares of the company as is? As fractional share access becomes more mainstream, the point of splitting stock at all slowly wanes out of the realm of rationality. After all, if the move provides no benefit but still takes a cost in administering, what's the point?

Well, in the end this likely comes down to a psychological effort. If lower-income retail investors can feel more empowered owning larger amounts of shares, perhaps the company can get a short-term boost in the stock price.

This in itself begs the bigger question. Why is Apple seemingly distracting us by this announcement? And if that's really the case, is it because they don't have much else to excite us with? Guess we'll find out.

Overall, the company still looks fine here as it continues to trend higher. The bulls clearly remain in control, but one has to wonder if much of the value is priced in at this point. Personally speaking, the stock fails to intrigue me at these price levels, and I would feel more comfortable if it migrated back down to that green line in the chart above. This is the line that represents the volume-weighted average price of all the transactions since the stock's bottom in 2020.

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Definitely psychological. People want to own at least ONE full share, or 10, or 100. Easier to do that now :)

Posted Using LeoFinance

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