Hey guys, I was reading in bloomberg that apple may do a stock split. I"m fairly new at trading, and i'm wondering what generally happens after the stock splits? My theory is that since more people can afford it, it will gain a at least a few percentage points immediately following the split. Might be a worthwhile day or swing trade especially since the general public is very familiar with apple. However, I have no idea how long until this will occur if at all. Anyone have any experience buying stocks after splits, if so how did the stock react?
hmm, when I was a kid they had £1 notes, I'd get maybe £5 in a card for my birthday from my aunts and uncles but generally I'd get it in £1 notes. I used to love that, I'd end up with 80 £1 notes in a big stack and I thought I was rich
A split is one of many merchandising techniques. Same pie cut into more slices, nothing more. Prior to the 1920's splits (conventional or reverse) were as rare as a lunar eclipse. Most institutions don't care about splits, but allows odd-lotters to trade in round lots. (Incidently, odd lots are bundled and fill FIRST) A split does provide the illusion of getting something for nothing. Hence, brings bugs to the porchlight. Get it? Might be a clue in 4 to 1 rather than 2 to 1.
Buffett always resisted stock splits. By keeping the share price high, discouraged buying of his stock from small money, weak hands, speculators and stock flippers. Stock splits are mostly to make the shares appear more attractive to smaller money.
Although the more recent news has shown that it probably won't happen anytime soon. I thought that since the stock is cheaper it actually is more attractive for the individual investor. My theory is basically this: Since the small individual investor now needs about $20,000 to afford a lot of 100 shares, he may not purchase the stock because its too much money tied up and too much money overall. However if the most smallest block he can purchase with a 4:1 split is now $5,000 he may decide to invest since its more affordable to purchase it. So there's my theory, if enough people think like that, then the stock may experience higher demand then usual immediately following the split. Especially with a company as popular as Apple, a lot of people would want to own a piece of that. Why else do stock's split? Isn't it because the price becomes too expensive for the individual investor to purchase 100 shares blocks.
Taken from investopedia.com " A stock split can also result in a stock price increase following the decrease immediately after the split. Since many small investors think the stock is now more affordable and buy the stock, they end up boosting demand and drive up prices. Another reason for the price increase is that a stock split provides a signal to the market that the company's share price has been increasing and people assume this growth will continue in the future, and again, lift demand and prices. "