What Tha Finance?! : Stock Splits
When you break up with bae, a lot of ish goes down! Depending on the nature of your relationship it can lead to bashing on social media to screenshots to even slashing tires. But there is another kind of split that I want to chat with you about within this edition of What Tha Finance (WTF)...
The news broke about the 4:1 Stock Split that will be happening for Apple had a lot of people like WTF is a Stock Split!? While I posted about it on IG and FB, I wanted to keep it in WTF fashion and give you all a little more context into what they are! Watch what I said about Amazon!
Update - Tesla announced that they, too, will be having a split up as well! With an interesting play of sorts, Elon and his crew made a similar call. Instead of a 4:1 split, they are calling for a 5:1 split. Seriously, click here.
WTF is a Stock Split?!
A Stock Split is a divide that increases the number of shares in a company. When this occurs, it often decreases the market price of individual shares, not impacting the value of the stock in question. Pretty simple, right? Well, there are many variations of which splits can happen. The most common splits are 2-for-1 or 3-for-1, which translates to the stockholder will get two or three shares, respectively, for every share held prior to the split.
Why do they happen?!
Why do companies do this? For a number of reasons, but the most common is to make share prices more attractive. And if you know the current pulse of the economy, you can understand why a company would do this. In a pandemic?! Yes, Beloved. They want to make their stock more affordable than affluent. The investment field is changing before our eyes. The price is going up! And if you held a stock during a split, the amount in which you had just went up. Another common reason for a company to do a split is to boost the liquidity of the company (cash). You think you are the only one stacking cash right now? Chile, check this.
Types of splits -
Forward Splits: This is the vein that Apple + Tesla is heading towards right now. In short, it is the division of the outstanding share of a company into more shares. A split can only be voted on by the Board of Directors and approved by shareholders (you know, investors). The PPS goes down, like you will see for both Apple + Tesla.
Reverse Splits: This is the complete opposite of what a Forward Split, but this allows the outstanding number of shares to be reduced greatly. An example of this is that if you had 300 of shares and there was a 1:3 reverse split, your currently holding of 300 shares will go down to 100 shares. Compared to a Forward Split, the PPS (price per share) will be more.
When is Apple splitting up!?
When the market stops for trading on Aug. 24, Apple will initiate its four-for-one split. Shareholders will see four times the number of shares they held previously in their portfolios by the end of business on Aug. 28. And the company's stock will begin trading for one-fourth of its previous share value starting on Aug. 31. The anticipated price point after the split is shaping up to be $125.50 (+/-). It will look like dis -
Elon gonna Elon -
This split is supposed to occur for the at the end of trading on August 31st. So, if you own a share before that date, when the light switches on within the next day of trading (stock market) you would be the proud owner of 5 shares (or more) of Tesla stock. Shares of Tesla have more than tripled so far this year, and are up 228.54% year-to-date. Crazy, right?! Pushing the market cap for the auto marker higher! Recently they were also named the most value auto company in the world! After the split, the anticipated price per share is looking like $443.40 (+/-)!
Here’s what that looks like for investors -
Could the Alphabet be changing? (February 1, 2022)
This post keeps going huh? So news broke that Google’s Parent Company Alphabet will be conducting a stock split on theirs will on come July 1, 2022. But this one is a bit different. They announced during their quarterly earnings that they will be pulling a…. 20-for - 1 split. This is like pulling a draw 4. And when they did this shares when up 9%. How does this play out? Alphabet intends to split the Class A, Class B and Class C shares of the stock (think like priority boarding when you get on a plane, will unpack later). While this still awaits shareholder approval (this could mean you if you currently hold shares for stock). Each shareholder at the COB (close of business) on July 1 will receive, on July 15, 19 additional shares for each share of the same class of stock they own. How does the math, math up?! Ok, so, boom - as of today: $2,752.88 to $128.64, and each existing holder would get 19 additional shares for every one they own. Yet, you would have to tally the potential impact that could have as share prices could increase over time. Taps like Madea
Granted that Alphabet doesn’t pay out dividends, think capital gains if this is your move.
This isn’t new -
Some of the most popular stock splits were - Apple (this isn’t their 1st one), Amazon, Nike, Visa, Johnson & Johnson and more. This isn’t new, but it is true what companies have done in the past when it comes to this process. Interestingly enough, they happen more than most investors realize.
What should YOU do?!
I’ve been getting questions about rather or not should you invest before or after the stock split. My perspective? It depends. Your answer is depending on what your position is. Do you have enough to afford the stock prior to the split? If that answer is no, hold off until the stock is affordable for your budget. 3B applies here Fam. Don’t feel like you have to have do what the trends say. You create your own wealth factor. All this boils down is to the company lowering the stock for Cap and for stock volume! It does help you if you want to start investing.
Now, if you have the stock already - Congratulations! You have more shares towards getting more capital gains and dividends (depending on the company). If you jumping in before, guard your heart 3 Stacks. Stocks go up and down without any heads up. Investing isn’t for the faint of heart. Dividends are paid out towards the amount of shares you have when a company declares dividends. The more shares you have, the more dividends are paid out to you. For certain funds, you should strive to get as much shares as possible to see the long play of your wealth. Here’s an example of how capital gains + dividends can impact your coints:
Word from our sponsor -
While this sounds all dope, don’t be so quick to jump on the bandwagon expecting bands instantly. Research before you reach for your wallet. A stock split should not be your only reason for snatching that company's stock! Strategy before snatching!
Tea: Uncle Warren has never split his company’s stock! He ain’t shaking it!
Want to learn more smoney terms? Check out the core article for links to topics covered thus far! I have a feeling a few more stock splits will come about as well!
Want to check the Split History? Google: “Stock Split History AND _______ “ (Name of stock).
How are you feeling about this new stock split from Apple + Tesla + Google?! Tell me below -
Oh, grab a Free Slice of Stock on me on Public! Click here!
[Updated 3/10/22]
Here’s some context around the recent news of the potential Amazon 20-for-1 stock split:
And Google 20-for-1 stock split: