What you need to know about Apple splitting its stock

The Apple second-quarter report added an extra announcement about executing a four-to-one stock split on August 24 and split-adjusted price trading to start by the end of the month.

The company said that the move, which is something no other tech giant has done in the past few years, is to make Apple more accessible to a broader base of investors, according to The Street.

The four-to-one split will divide the price of the company’s stock to 25% of what was previously. This will allow investors to buy Apple stock for a much lower price.

A great opportunity for investors

As of Friday, the stock is at US$425[AU$590.56]. If the stock stays at around the same price by the time the split happens, investors would be able to buy into Apple for just $100.

According to TradingView general manager Pierce Crosby, Apple’s move was interesting in that it “plays into the behavioral psychology of retail investors. If a trader wakes up and sees a price that’s now 1/4th of what it was on the previous trading day, some will buy it out of natural instinct.”

The upcoming August split marks the fifth time the company has done som since the company went public in 1980. The stock was split 2-for-1 in 1987, 2000, and 2005, and 7 to 1 in 2014.

The media outlet then quotes the CEO of the Webull—a trading platform, Anthony Denier, saying, “This tells investors that the stock has done well…this usually results in increased demand, which should lift the share’s price. And that is where shareholders receive the biggest benefit.”

What you need to know about Apple splitting its stock

A non-event, but could still be critical

However, the split is a “non-event,” as reported by Market Watch. Ric Edelman of Edelman Financial Engines stated that the split “has no economy implications or bearing on the value of the investment or the outlook for Apple as a business.”

The split is expected, however, to affect the weight of the Apple stock in the Dow Jones, and could impact the benchmark’s returns, according to a report by Reuters.

When Apple was added to the Dow in 2015, the company became a critical component in driving gains due to the 230% increase in its stock since.

But the split will give the company less influence because the stock is weighted to the price of the shares of its 30 components.

Currently, Apple accounts for 10% of the Dow but will make up only one-fourth of that after the split happens. What happens to Apple stock in the future, whether it be losses or gains, would have much fewer effects on the Dow’s overall performance.

Images courtesy of Robson90/Shutterstock, zhang kaiyv/Pexels

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