Apple and Tesla shares surge after stock splits kick in

[brooklynite]

Source: Reuters

(Reuters) - High-flying shares of Apple Inc and Tesla Inc surged again on Monday as stock splits took effect and attracted more buying from investors.

Apple jumped over 4% and Tesla rallied 10%, elevating the electric car maker’s market capitalization to over $440 billion, making it more valuable than companies including Walmart and Johnson & Johnson .

Apple split its stock 4-for-1, while Tesla split its stock 5-for-1, with both companies saying they aimed to make their shares more affordable to individual investors.

Robinhood and other brokerages increasingly let customers buy fractions of individual shares, making the benefit of stock splits less obvious than in the past. Splits have become less common. Just three S&P 500 members announced splits in 2020, down from 12 in 2011, according to S&P Dow Jones Indices.


Read more: https://www.reuters.com/article/us-apple-stock-split/apple-tesla-shares-pop-after-stock-splits-idUSKBN25R1FA?utm_source=Twitter&utm_medium=Social&__twitter_impression=true&__twitter_impression=true

[ProfessorGAC]

1. The Snip Covers Why I'm Surprised

The buying of fractional shares seems to fly in the face of the reasons given by Apple & Tesla.
If you were going to buy 20% of a share in Tesla, now you buy 1.
It's an identical investment and an identical fraction of shares outstanding.
If they had done this, then released a couple million shares from treasury, it would be a cash flow move.
But, Apple has $193 billion cash on hand, so that can't be a motivation for them.
An odd move.

[brooklynite]

2. Its not an identical investment...

If you buy MY Apple shares you own them outright.

If you buy fractional shares from an Investment Company, you may receive the same investment/resale value, but you may also be paying the Investment Company for account management.

[ProfessorGAC]

3. That Could Happen Anyway

Depends upon how the brokerage account is set up.
My retirement funds are intended to be investment transparent, but I don't really look at those details. And the fees, like most funds and/or IRAs are baked in, so the apparent yield reported includes that.
Don't like the arrangement of an individual fund, or the equity selections, can move to a different fud, but not outside the IRA itself, without penalties or taxes.
So, in fact, it's the same investment if one doesn't alter the fund in which the money is invested.
I suppose if one is trading on a very low trade fee site and doing individual investing, there's a modest difference.
But, if one now buys 200 shares, instead of 40, the difference is insignificant.

[bucolic_frolic]

4. Nice that they print shares as fast as the Fed prints money

I seem to recall some study from decades ago that postulated 7 stock splits as about all the juice they can wring out of a company. After that the volatility falls. It's not dilution of earnings, but oversupply of stock even though it's the same aggregate valuation. More investors able to own them. Yes, ok, that's what happened today, but doesn't it make it easier to cash in a couple hundred and still have a growing pie? Taking a little money off the table, rebalancing in essence, is not an unknown idea.

I'm thinking once the buildout of the home-gig economy is over, there won't be as much growth in technology companies. It's like the dot com bubble reverberating in cloud computing.

[aquamarina]

5. It's not the price that's

really important - it’s the number of shares you own.
If you owned 100 shares (Pre-split) you made $100 dollars for every $1 increase in share price.

Today (post-split) you now own 400 shares so every dollar increase earns you $400. That’s a huge gain.

[JustABozoOnThisBus]

6. It's not the dollar increase per share that's important, it's the percentage.

A stock split shouldn't impact the total value of one investor's holdings.

Apple and Tesla stock price has been rising, pre-split and post-split. It's hard to say whether today's increase was due to a split, or just another day of trading.

[aquamarina]

7. True - but if you own more shares

any percentage increase is going to result in more money the more shares you own. A 1% increase on 100 shares is a lot more money than a 1% increase on 10 shares.