Apple and Tesla just announced stock splits. Here’s what this means for your investments

08/13/2020 World


Here’s what you need to know if your shares are divided into two (or three, or four, or five).

A stock split does exactly what it is sounds like: One stock is divided into multiple stocks, without changing the total value of the holdings of investors. They are simply divided into more individual units.

So, who benefits from a stock split?

Lowering a company’s share price can bring its share within reach of smaller, individual investors. That is good for the liquidity of the company and creates more demand for its share.

On Monday, Apple, one of the most valuable companies in the world, announced a 4-for-1 action split, which will take effect from 31 August. A single stock was traded at around $ 450 on Wednesday. Beginning in September, that will be closer to $ 100.
This will be Apple’s fifth stock split since it went public.

The price change will be more dramatic at Tesla, whose share traded at more than $ 1,500 a share on Wednesday. Its 5 for 1 split, also set for August 31, will bring an individual share into the $ 300 range.

That’s not exactly cheap yet, but it’s already a profit for both companies, whose share values ​​have increased even higher since they announced their movements.

Some companies meanwhile refrain from splitting their shares and simply see that their share value is getting higher and higher. One such example is Warren Buffet’s Berkshire Hathaway.
Berkshire’s Class A (BRKA) shares ended Wednesday at nearly $ 320,000 per share. You can do the math in how many ways you want distribution to split. The company class B (BRKB) shares, which have been split in the past, are a much more affordable $ 213 per share.

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