During Thursday's third quarter results, Apple announced that the company's board of directors had approved a 4: 1 stock split.
Share splits are cosmetic in nature, meaning they do not change a company's underlying fundamentals. They can re-interest smaller investors by making the now cheaper stocks more accessible. However, this interest would not be sufficient to influence the share price more than larger investors who are already trading the share freely.
In this case, all investors who currently own the share will receive three additional shares after the market closes on August 24. With Apple stocks trading around $ 400 in the after hours, the new price for holders is $ 100 when trading on a share starts on August 31st, split-adjusted basis.
Apple's move is not uncommon, and the company has done stock splits in the past. The technology giant's last split occurred in 2014, allowing it to be factored in and ultimately added to the Dow Jones Industrial Average.
The 30-share index is price-weighted, which means that the impact of changing a company's share price depends on how much shares are traded. Apple is currently the stock with the highest price in the index, which may have influenced the company's decision to share its stocks.
Apple said in the press release that it had approved the split to "make the stock more accessible to a wider investor base."
Stock splits have sometimes had a bad reputation as stocks can see a surge in the news, although the company has not announced a significant change.
For example, during the tech bubble, a number of companies did stock splits that fueled rampant speculation and pushed stocks up without earnings growth to support the price. Many investors have recently feared that tech stocks may be too far ahead of their fundamentals, as was the case in this speculative period.
Warren Buffett's Berkshire Hathaway is known to have never split the price of its main A shares, which are currently trading at $ 291,362.
"I think most people think the stock would be sold for more money. We wouldn't necessarily think that this was advisable at all," he said at the company's 1994 annual meeting.
"Secondly, we do not believe that this will necessarily be the case over a period of time. We believe that, according to current policies, our stocks are more likely to be reasonably priced over time than if we were to split them up in a larger way And we don't think the average price would necessarily be higher. We believe volatility would likely be a little higher and we see no way that volatility will help our shareholders as a group, "he added.
However, Buffett has split the price of Berkshire B shares.
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