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Apple Announces 2 for 1 Stock Split
neosar82 writes "Yahoo has a story about Apple's stock split. Apple Computer Inc. whose shares have almost quadrupled in value over the last year on the success of its iPod music player, on Friday said it set a 2-for-1 stock split, and its shares rose almost 4 percent. Under the share split, Apple shareholders of record at the close of business on Feb. 18 will receive one additional share for every outstanding share held. Apple said trading will begin on a split-adjusted basis on Feb. 28."
Sure - do you accept the Elbonian Eyecrud?
I, personally, would be buying some o' that fruity goodness right now... were it not for the fact that I'm broke. Worse yet, I'm broke in Australian Dollars.
Yet another piece of Apple I'm destined to drool over, but never own...
--- Egads, I glow in the dark!
Warren Buffett's Berkshire Hathaway has never split its stock, which is all you need to know about stock splits, AFAIC
True, but the price of Berkshire Hathaway stock is currently $91,000 per share.
While nice for the stockholders, I'd expect that to limit liquidity somewhat, because there just aren't as many people with funds to buy stock at $91,000/share. Today only 290 shares traded. 3 month average volume is 393 shares. (It'd probably be harder to make an option-based incentive program work with so few shares outstanding. And you can pretty much forget about non-executive employees having stock in the company.)
Like it or not, many (probably most) investors are not perfectly rational creatures. They'll buy a stock, after a split, because the share price drops into a range that they find attractive or accessible.
If someone would like to invest in Apple right now, they might not have $8,000 available to buy 100 shares. On February 28, they'll be able to buy 100 shares for $4000 or so, which perhaps they can afford.
Now, if you're Homo Economicus ( a runtlike feral creature recently discovered in fossils on an island in Southeast Asia) you understand that halving the price doesn't necessarily make Apple any better of a buy. It's not like a half-price sale.
But most people aren't that rational. They invest like it is a half-price sale. Never mind that you're getting half as much of Apple when you buy a share.
Splitting a stock helps companies take advantage of this kind of behavior. At a given price, there will be people who want to buy, but can't. Halve the price with a split, and those people will buy, unless the fundamentals are atrocious. If the company was good enough to buy, pre-split, but cost too much, they'll buy post-split, which helps drive the price up again.
There's a big psychological factor. It's also part of why companies occasionally do a reverse split, to raise the price of their stock. If a stock is down around $5 or less, like Sun's, it just looks like a loser, fading into inconsequence.
September 2011: Looking for Cocoa/iOS work in Boston area Cocoa Programmer Quincy, MA
That was about 3+ years ago, at one of Apple's low points. The stock has about quintipled ($10/80). OSX was so clearly in the right direction, albeit broken that it was indicitive of good things (iPod,Mini, Xserve clusters, etc.) of things to come.
There formula for success is the same as google's. Build an efficient user-experience over a solid backend.