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Tue Jul 27 | 5 minute read
First Apple [stock_quote symbol=”AAPL” show=”symbol”], now Tesla [stock_quote symbol=”TSLA” show=”symbol”]? Another stock split??
Tesla announced today they are going to do a five-for-one stock split. Immediately, Tesla shares rose more than 6% in post-market trading even though the stock split changes nothing fundamental about the stock.
So, whats up with all these stock splits? Why is everyone doing this?
First, let’s talk about what a “stock split” is. A stock split is when a company divides its the shares that exist currently into multiple shares.
For example, Let’s say a company has 100 shares out at $10 each (Total value $10,000), they do a stock split and now has 400 shares out at $2.50 each (All still worth $10,000).
Why do this? The value doesn’t change. Well, they do it to attract new investors. With the new influx of the millennial “Robinhood Investor” these companies want to attract more people and hope that in turn they can increase the share price. People are afraid of expensive stock. If you are selling at $1,600, many people, especially younger people without as much disposable income as the older generation, will be put off by the high price. By lowering the price of each share the company hopes to bring in these new investors.
Apple said in the release it approved the split to make “the stock more accessible to a broader base of investors.”
If you already have Tesla stock, you will receive four additional shares after the market closes on the stock split day. With Tesla’s shares trading around $1,400 at the time of this writing, the new price for holders will be around $280 when it begins trading after the split.
I see this a a great buying opportunity for both Tesla and Apple. I am definitely in for 3 reasons:
- Apple’s results on the last earnings call were very strong, according to CNBC.
- Apple DEFINITELY is coming back in China. One of the worlds biggest economies.
- And like we said before, with Apple being a household name and the new influx of Robinhood Millennial investors, The Lower Stock Price Will almost certainly Attract More Investors to both Tesla and Apple.
I am definitely watching.