A student last week mentioned that he heard that Apple stock was going to “split.” The LA Times confirmed that a day or two ago. The split will be 4 to 1. That means the board of directors has decided to “give” each shareholder three more shares for every share the shareholder already has. So there is about 4 billion shares outstanding as of last Tuesday, there will suddenly be 16 billion. Since the total value of the company does not go up, the cap value will still be $1.9 trillion. The value of each share therefore should drop from $451 to $113. Why would the company do that, the board of directors do that? It brings smaller investors to the table. Shares are generally sold on the NY Stock exchange in lots of 100. There are more people who can afford $11,300 for 100 shares than $45,100. What good does that do Apple? Does it help them sell more iPhones? No, but if Apple decides to sell new shares, there will be more interested buyers which will make the new shares easier to sell. If Apple wants to raise $100 million, i.e., the board of directors decides to raise $100 million by selling new shares (885,000 new shares), they are easier to sell if there are more interested buyers.
One thought on “Apple stock to split”
Apple is very profitable.