Apple Announces Stock Split

[Echinda]

There are other reasons to do stock splits

A stock split is not necessarily an end to itself. It can be a means. This is a rumor site, so here goes some rampant speculation: If you were Jobs and you wanted to spin-off of your iPod division, you might want to up your float so as to give people shares to trade in on the spin-off without materially impacting your stock's post-spin liquidity. There are holes in that theory, but its just an example of another reason for a split.

 

[Daveway]

I'm rich Biot*h. I will soon be the the proud own of 400 shares of Apple common stock. My mom called me up yelling this to me this morning. Great new for Apple.

 

[varmit]

Now I have more stock, same amount of profit, and a likely chance of the stock going up and up, I'm happy.

 

[pimentoLoaf]

Palm was trading around $9 back in early 2003; selling off something else, I could've had around 3000 shares of it.

In September of that year, they merged with Handspring and had a 3:2 split -- meaning, multiply by 3 = 9000 then divide by 2 = 4500.

The stock then zoomed to around $40 * 4500 = $180,000.

I would've made a $152,000 profit.

But didn't.

 

[TheMasin9]

What is the effect of doing this? I understand the fact that there are now twice as many shares available at half the price, but what is the real economic effect?

-ac2102

its not really that big of a deal except it gives shareholders more options and makes the stock more applealing to other buyers

 

[dloomer]

This must be a dumb question since no one has asked it, but what happens between the 18th and 28th ... is AAPL just not traded then? If you have to hold the stock before the 18th to get in on the split, but the split doesn't happen until the 28th...

 

[wrldwzrd89]

In the long run, the net effect of a stock split is zero. In the short run, it serves to make the stock in question easier to buy for small investors, and also acts as a signal from the company splitting their stock that they expect it to continue to grow.

A similar situation applies to a stock merge (the exact opposite of a stock split). In this case, the company merging their stock is not doing so well and wants to make their stock not look so bad. It tells investors that the company is in bad times and is taking measures to get back on solid ground. Sometimes these fail, and the company dies along with them.

 

[MacBandit]

This must be a dumb question since no one has asked it, but what happens between the 18th and 28th ... is AAPL just not traded then? If you have to hold the stock before the 18th to get in on the split, but the split doesn't happen until the 28th...

The split doesn't value or devalue the stock in anyway so trading goes on as normal. The only way it may devalue the stock is if as in the past some look at it as a depreciation of stock value causing stock to actually lose value.

 

[Yamson]

This must be a dumb question since no one has asked it, but what happens between the 18th and 28th ... is AAPL just not traded then? If you have to hold the stock before the 18th to get in on the split, but the split doesn't happen until the 28th...

I had the same question... It seems like under that scenario no one would buy in to Apple between those two dates because their stock values would be essentially cut in half come the 28th (since they were not in by the 18th, they would not receive the two-for-one split). I feel like I'm missing something here. I am a novice investor and I do generally understand the concept of a split and that it shouldn't change the overall value of an individual's investment, but this part confused me. Someone please explain?

 

[jkeithh]

I bought at 12, sold at 35. What an idiot.

I feel your pain. I sold at $25.

 

[kenaustus]

One of the interesting factors related to the small investor and their purchasing AAPL is the influence this might have on them when they replace their computer. Think they will finally look at Macs?

As I recall this is the on only reason old Henry Ford sold shares in Ford - someone told him that shareholders in GM would buy a Chevy and if they could "own part of Ford" they would buy Fords. He sold the stock so individuals could own part of the company and buy Fords.

Almost a century old concept, but I would think it is still valid. For me this is the primary benefit for a stock split for companies in the consumer markets and I would have been happier if Apple would have come out with a 3 for 1 split.

 

[tinydancer]

Hmmm, not sure why you guys think this is good news. Stock splits don't mean anything.

Hmmmm....to the contrary. It means everything. The value may not chage because I have twice ass many shares trading at half the price, but as the stock price goes up, (Apple is on fire) I now havce twice as many shres gain $$$$. Do the Math!

 

[Yamson]

Hmmmm....to the contrary. It means everything. The value may not chage because I have twice ass many shares trading at half the price, but as the stock price goes up, (Apple is on fire) I now havce twice as many shres gain $$$$. Do the Math!

Yes, but your twice as many shares are earning half as much as they would otherwise... 2 * 1/2 = 1.

 

[dloomer]

The split doesn't value or devalue the stock in anyway so trading goes on as normal. The only way it may devalue the stock is if as in the past some look at it as a depreciation of stock value causing stock to actually lose value.

To clarify what I said -- the MacRumors post states that you must hold the stock by the 18th to get in on the split. So if I buy on the 19th, I don't get in on the split? Which means that on the 28th, I have the same number of shares but the value is approximately half of what I bought it for?

I'm wondering if the text was a typo. Maybe the 18th should be the 28th or vice versa...

 

[tinydancer]

You all keep debating the merits of a stock split and I'll be in the other room making some money.

 

[wrldwzrd89]

Yes, but your twice as many shares are earning half as much as they would otherwise... 2 * 1/2 = 1.

Correct...but tinydancer was referring to the fact that a stock split often leads to future growth in share price, thus more profit than would be earned without the split.

 

[Yamson]

Correct...but tinydancer was referring to the fact that a stock split often leads to future growth in share price, thus more profit than would be earned without the split.

I dunno... Looks to me like in the last two Apple splits the price went more or less flat, or dropped significantly (granted, due to factors unrelated to the splits). Splits don't necessarily mean increased growth.

 

[tinydancer]

Yes, but your twice as many shares are earning half as much as they would otherwise... 2 * 1/2 = 1.

What are you talking about?
Example:
on average over the past 3 weeks Apple has been earning about 50 cents a day.
If I have 10 shares at $80 and there is a split. I now have 20 share at $40. Yes, the value is the same, but as the stock price continues to grow, I now have 20 shares earning 50 cents a day as opposed to 10 earing 50 cents. I have more shares in the company growing. How is this confusing? Yes, at the split the value is the same, but with more shares earing every day then I'm all for it.

 

[wrldwzrd89]

I dunno... Looks to me like in the last two Apple splits the price went more or less flat, or dropped significantly (granted, due to factors unrelated to the splits). Splits don't necessarily mean increased growth.

You're right...I guess AAPL investors don't really understand the implications of a stock split.

 

[Yamson]

What are you talking about?
Example:
on average over the past 3 weeks Apple has been earning about 50 cents a day.
If I have 10 shares at $80 and there is a split. I now have 20 share at $40. Yes, the value is the same, but as the stock price continues to grow, I now have 20 shares earning 50 cents a day as opposed to 10 earing 50 cents. I have more shares in the company growing. How is this confusing? Yes, at the split the value is the same, but with more shares earing every day then I'm all for it.

You have to look at it in terms of percentages. A 1% price increase per share is a 1% price increase per share whether it costs $40 or $80. In the former case, you just earned 40 cents per share, but you have twice as many. Without the split you would have earned 80 cents per share, but have only half as many shares. It's all about percentages.

 

[trose]

I wish I would have had more money to invest.

I bought 20 shares at $12 (In part due to this site keeping me informed on the iTunes Music Store and PPC970 before they were released), still have em, so ya they have turned a nice profit especially for someone my age (18), but boy it would have been nice to have had... say, 100, or 1000 shares .

I'm hesitant on whether I should invest anymore... on one hand I have a strong belief that Apple has a lot of growing room.
The iPod is still booming, the market is not saturated. Talking on the phone everyday to people with PCs, fixing their problems, I realize it's not just a minority anymore who are frustrated with Windows. People have wizened up (just a bit ), computer viruses and spyware are household words now.
In the next 5 years I see Macintosh sales increasing substantially, spurred by the Mac Mini and dissatisfied Windows users. I see Apple rolling with their digital media player and store concept, moving onto video and who knows what else.
To me, it feels like Apple is really in tune with what the public wants now, the first time it has really been since the release of the first iMac, when people were sick of 20 years of beige and boring computing.


On the other hand, this is all speculation. I'm not a financial wiz, I can do the standard evaluations of a stock(which would tend to tell you Apple is overvalued), but I can't estimate future earning and profits, etc etc.

Hmm...

 

[billystlyes]

I almost bought Apple at 18 dollars! I did however buy some sahes at 40!

 

[swissmann]

I had Apple stock the last time they split. I would sure like to be part of their stock now but funds are limited. Hope Apple stock stays strong.

 

[MacBandit]

You're right...I guess AAPL investors don't really understand the implications of a stock split.

Even stock gurus were commenting about Apples loss last time Apple made a stock split. They still continue to make the comments about how Apples stock went from $50 whatever a share to half that overnight without any mention of the stock split. Everytime I hear it mentioned I get enraged it's like they don't do any research and just look at the graph of the stocks value.

 

[trose]

Even stock gurus were commenting about Apples loss last time Apple made a stock split. They still continue to make the comments about how Apples stock went from $50 whatever a share to half that overnight without any mention of the stock split. Everytime I hear it mentioned I get enraged it's like they don't do any research and just look at the graph of the stocks value.

What you gotta realise is that stock "gurus" rarely really have a passion or interest in the companies they invest in. They look at the numbers and make up their mind. They don't know anything about Apple's history or plans besides what was put out in press releases.
They are experts at reading numbers and predicting standard trends, but they will not be able to cope with a company that does something non-standard. Which of course, we all know Apple is anything but standard in it's earnings or business.

One tip the Motley Fool (really the best investing resource for common folk) gave me that has payed off, is investing in companies and markets you know.
Besides Apple I have also invested in a couple other companies in fields I enjoy, and have made considerable (Double value) gains on them in the last 2 years, also.