Apple Announces Stock Split

On Monday, Apple split its stock, bringing the price of one share down from $645.57 to $92.44. Current owners of Apple stock now have 7 shares for every share they owned prior to the stock split. Stock splits are usually 2-for-1 or 3-for-1 so Apple’s 7-for-1 split is unusual. The result of this split is that “Apple now has more than 6 billion shares of stock outstanding, up from about 860 million shares before the split.”

The advantage of moving forward with a stock split is that Apple can now attract more individual investors because the lower price is more affordable for individuals who may not have been able to afford the stock when it was valued at $645.57.

Another reason Apple may have decided to do a stock split is to increase the “stock’s liquidity which increases with the stock’s number of outstanding shares.” In an announcement made in April, CEO, Tim Cook, said, “We’re taking this action to make Apple stock more accessible to a larger number of investors.” The effect that this announcement has had on the market is that trading “is slightly heavier today although many people say they intend to buy shares throughout the week.”

Some observers speculate that the reason Apple went forward with this stock split is to get added to the Dow Jones industrial average. Since “the Dow is a price-weighted measure . . . the bigger the stock price, the larger the sway for a particular component.” Because of Apple’s high stock price, it was never a part of the Dow but perhaps after this split, it may get added to this stock index.

Apple has split its stock three times prior to this split and it is unclear whether this split will have a material impact on Apple’s performance. Regardless, demand for the shares went up since the announcement so Tim Cook’s goal in making Apple stock more accessible to a larger number of investors may be coming to fruition.