A lot of people have been curious about whether or not they should buy Apple shares and/or Tesla shares before or after they split. The curiosity has led to so many people jumping to buy, as well as having debates on what to do vs what not to do. Honestly, I'm just happy to see so many young men and women be interested in the topic and taking the time to research the stock market. I wanted to weigh in and give my followers my perspective as an active Stock Investor.
First starters, What’s a stock split? Simply put, a stock split means a company has chosen to divide existing shares into two or more shares. So if a stock is set to split 4 to 1, that means that for every share you hold after the split, each share will be worth 1/4 of what it was previously. So let’s say if Apple is trading at $400 per share and you currently hold 1 share after the split you'll have 4 shares each worth $100 (or more). So for example, let’s say Susie buys one share today (before split) for $400 and Joe buys 4 shares on September 1 (after the split) for $100 a piece, both Susie and Joe will have four shares in Apple after the split valued at $400 total. (This example is assuming that the price will be the same after the split, which I highly doubt)
What are the benefits of buying before split vs after? Well, the benefit of buying before the split is that it may save you money, make you more money, and get you more shares! "Ayanah that's dumb how?" Well, Sis, (or Bro?) Let's say Susie (The name just seems to fit, okay?) has $500 to invest and on Monday, August 24th before the close of business, she takes that $500 and purchases 1 share of Apple which is now about $498. Then, on August 31st, her $500 will have gotten her 4 shares at $125 a piece! Now let's say she waited until after the split to invest the same $500, but when she went to purchase a share, the stock value went up from $125 a share, to $217 a share, now how many shares will she get by investing her $500? Two and a fraction.
A benefit of buying after the split is just that it's cheaper. Everyone doesn't have hundreds of dollars laying around to invest and let sit somewhere for however long is necessary, so being able to purchase a whole share or get more for your money buying a fractional share, maybe a better solution for some.
So will owners of Apple stock who purchased before the 4-to-1 split have four times the amount of shares once the stock splits? Yep. Say you own 10 shares of Apple today. When the stock splits 4-to-1 in late August, you’ll then own 40 Apple shares. Same with Teslas 5-to-1 split.
When does Apple’s shares split? Apple will split its shares 4-to-1 on August 31, 2020. The deadline to purchase before the split is August 24th at I think 4 pm? When does Tesla split? It splits on August 31st as well and the deadline to purchase was August 21st.
So why are they splitting and what are the benefits ??
This will be Apple's fifth time splitting since it went public in the 80s. They want to appeal to a broader audience while being affordable.
The split will reduce Apple’s current share price by a factor of four, making it look cheaper. This could entice new buyers to snap up Apple shares because shares will be cheaper to acquire. Same with Tesla, they are always making decisions to appeal to the mass market, and splitting can get them more investors.
Hopefully, this helped explain a little or a lot about what's happening!
Where can I buy stock/shares? I use Acorns, Cash App, and Robinhood to purchase stock. (Yes I use all 3) but you can choose which one is right for you. Cash app is easiest for beginners, then Robinhood, then Acorns. Below are my links if you’d like to sign up and start investing in stock for yourself!
Do what you can, use what you have, start where you are. Always.
Robinhood (When you sign up, we both get a free stock!)
Acorns
Cash App
FAQs
A stock split is a decision by a company's board to increase the number of outstanding shares in the company by issuing new shares to existing shareholders in a set proportion. Stock splits come in multiple forms, but the most common are 2-for-1, 3-for-2 or 3-for-1 splits.
Is it better to buy before or after a stock split? ›
This move exemplifies how stock splits can help make high-value stocks more reachable for everyday investors while maintaining the same overall investment value. In the past, buying before a split was seen as a good strategy to reduce trading costs due to commissions weighted by the number of shares you bought.
Is it better to sell stock before or after split? ›
That said, many stocks have shown strong performance after a split. In other words, selling your shares of a stock prior to a split isn't always the best decision – unless, of course, you're not well-positioned to continue holding the stock.
How does a 3-for-1 stock split work? ›
A 3-for-1 stock split means that for every one share held by an investor, there will now be three. In other words, the number of outstanding shares in the market will triple. On the other hand, the price per share after the 3-for-1 stock split will be reduced by dividing the old share price by 3.
Do I make money if my stock splits? ›
Stock splits: What you need to know. A stock split doesn't change the value of your investment. If you own the stock of a company that executes a stock split, the details of your position change, but the total value of your position does not. Here are the key things to know about stock splits.
Do stock prices go up after a split? ›
When a stock splits, it can also result in a share price increase—even though there may be a decrease immediately after the stock split. This is because small investors may perceive the stock as more affordable and buy the stock. This effectively boosts demand for the stock and drives up prices.
Will Walmart stock split in 2024? ›
Walmart's common stock will begin trading on a post-split basis at the market open on Monday, Feb. 26, 2024, under the company's existing trading symbol “WMT.” The stock split and final ratio were approved by Walmart's board.
What is 1 for 10 stock split? ›
On August 24, 2023, AMC Entertainment Holdings (AMC) completed a 1-for-10 reverse stock split. That means that for every 10 shares owned, AMC stakeholders were issued one new share. If they previously had 100 shares, they now had just 10 shares. In other words, the total share count was been reduced by 10 times.
Which stock is splitting in 2024? ›
The most high-profile of those companies include retail giant Walmart and chipmaker Nvidia, as Fast Company previously reported. And other companies in 2024 have split or announced they will split their stock. As CNBC notes, some of those companies include Williams-Sonoma, Broadcom, and Sony Group.
Why don't stocks split anymore? ›
Importantly, splits did not increase after the market began recovering in 2010. The likely reason is the institutional base for stock ownership has come to dominate the market. Institutional investors invest by dollar value, not by shares.
From time to time, stock splits are followed by a bump in stock performance—but not always. Is the split worth it? – Stock splits have no tangible impact on a company's total value—they simply create more shares at more affordable prices.
What is the primary reason for declaring a stock split? ›
Answer and Explanation: The correct answer is b. Lower the trading price of a stock into a more acceptable trading range.
How much was $1000 in Walmart stock in 1970? ›
Investing $1,000 In Walmart IPO: Walmart offered shares for $16.50 on Oct. 1, 1970 for its IPO. A $1,000 investment could have purchased 60.61 shares of Walmart stock.
Is Walmart a good buy right now? ›
Walmart has 7.73% upside potential, based on the analysts' average price target. Walmart has a consensus rating of Strong Buy which is based on 25 buy ratings, 3 hold ratings and 0 sell ratings.
Why doesn't Costco stock split? ›
The price may not be high enough for Costco to do a split
If it were to do a 20-for-1 stock split, that would put its price at less than $40.
Is a stock split a good thing? ›
A stock split is neither inherently good nor bad. Again, after the split itself your position as an investor remains unchanged. You own a different number of shares, but the value of your investment remains the same. However, stock splits often do lead to portfolio growth.
What does it mean when a stock splits 20 to 1? ›
When a company splits its stock, that means it divides each existing share into multiple new shares. In a 20-1 stock split, every share of the company's stock will be split into 20 new shares, each of which would be worth one twentieth of the original share value.
What does a 10 for 1 stock split mean? ›
The 10:1 stock split meaning is fairly intuitive; it implies that for every one share held, shareholders get ten shares (post-split).
What does it mean when a stock splits 5 to 1? ›
5-for-1 split ratio: In a 5-for-1 stock split, each individual share of stock is split into five shares. The market price of those five new shares is one-fifth the price of the old share.
