“It’s a really interesting move, without a doubt,” said Pierce Crosby, managing director of TradingView, a social network for traders. “As Apple approaches $ 2 trillion in market value, a stock split has no value on its own, but it plays into the behavioral psychology of retail investors. If a trader wakes up and sees a price that is now 1 / 4th of what it was the previous trading day, some will buy it out of natural instinct. ”Stock analysts reacted positively to the news, pointing out that the move would open up more liquidity in stocks and potentially broaden Apple’s investor base. Apple said in its third-quarter earnings call that the split aims to make its stock, which has more than quadrupled in value since Apple’s last split in 2014, more “accessible” to more investors.Stock splits also signal investors that a stock has performed well, which justifies the split. It can also have positive effects on stock dynamics, added Anthony Denier, CEO of the Webull trading platform.
“This tells investors that the stock has performed well… it usually translates into increased demand, which should push the stock price up. And this is where shareholders receive the greatest benefit, ”he said.
Including the latest announcement, Apple has split its stock a total of five times since its IPO in 1980. It has split on a 2: 1 basis in 1987, 2000 and 2005, then again on a. seven for one. in June 2014.
Meanwhile, some of Apple’s large-cap peers haven’t split stocks almost as often, despite comparable gains in their valuations over the past two decades.
Only Microsoft (MSFT) – Get the report, which went public in 1986, has divided itself more often than Apple among the tech giants. Facebook (FB) – Get the report, which went public in 2014, has never split its action. Google (GOOGL) – Get the report divided its action once, in 2014. Amazon (AMZN) – Get the report, meanwhile, split its stock four times in a row in 1998 and 1999, but hasn’t done so since – even though its individual stock price is by far the highest in the bunch, at $ 3,164.68 Friday.
Asked about the possibility of a stock split at a shareholder meeting last year, Amazon CEO Jeff Bezos said, “ [doesn’t] consider doing so at this point. “
“Amazon doesn’t care about the interest of retail investors,” Crosby added. “If you know there is a demand – even at $ 3,000 – you don’t need to cut prices. This tells you that Apple might be concerned about the general interest of retail, or they might be interested in giving shares to their customers. For example, buy a new iPhone, get a share of Apple. ”
Most brokerages also allow retail investors to buy fractional shares, so splitting at a lower price per share isn’t necessary to attract more retail interest – but it certainly helps. . The decline in the stock price also makes it more accessible to Apple employees who receive stock-based compensation, in addition to core investors who take smaller positions.
Another potential side effect of the Apple split? Its action will have a more moderate impact on the Dow Jones Industrial Average, added Vincent Ning of investment management firm Titan.
“The only thing that is unique about Apple is that it is one of the thirty stocks that make up the DJIA, which, unlike many other stock indexes, is in fact affected by price levels,” a- he explained. Apple currently holds the most influential position in the Dow index.
“After the split, that top spot would most likely be ceded to UnitedHealth or Home Depot, which would obviously change the way this index moves,” he added. “Through the FANGMAN [Facebook, Apple, Nvidia, Google, Microsoft, Amazon and Netflix] stocks, Microsoft is the only other name impacting the Dow, so a potential future split could also lead to further changes in how this index moves. ”
Apple stock on Friday closed 10.8% higher at $ 425.04.