4 ms·

Anyone know what a stock split typically means for current shareholder value? I’m assuming the price would go back up and shareholder might make a boatload of m

Anyone know what a stock split typically means for current shareholder value? I’m assuming the price would go back up and shareholder might make a boatload of money. One one have any expert advice? I know nothing about stocks.

awb 5y ago
It just means that the price of an individual stock is too high for the average investor to be able to purchase it. AMZN closed today at $2,782.94. If they did a 20:1 split today, that means if you owned 1 share @ $2,782.94, when you wake up in the morning you would now own 20 shares @ $139.14 (20x the shares @ 1/20th the original price). It can lead to a slight bump in stock price because it's easier for average folks to buy a $139.14 share than a $2,782.94 share. More demand -> prices go up. However, macro conditions like the US economy, world news, or news that affects the business directly are probably going to have a greater impact on price than a stock split.
- s1artibartfast 5y ago
  >It can lead to a slight bump in stock price because it's easier for average folks to buy a $139.14 share than a $2,782.94 share. This is true but one of the stupidest things in the market. Some retail investors have not concept of fundamentals. I have met some myself that don't understand that stock price is a function of the number of total shares.
czzr 5y ago
Theoretically a stock split doesn’t change anything - let’s say you used to have 100 shares valued at 10 dollars each, and the company decides to change that to 200 shares at 5 dollars. You still have the same amount of value (1000 dollars). So why do it? Usual reason is to make trading a bit easier - now you can sell 1 share at 5 dollars, rather than having to sell 1 share for 10, which might make it easier to find a buyer.
- imwillofficial 5y ago
  In the past has this been a net gain? Got RSUs vesting this year and trying to decide to sell or keep.
  - floatinglotus 5y ago
    If you work for the company you should keep your shares and vest as much as possible. The split has no impact on you in reality. If you work there you are in for the long haul and you’re going to do well given the current trajectory.
    - deleted 5y ago
      [deleted]
  - geraldwhen 5y ago
    https://en.m.wikipedia.org/wiki/Endowment_effect https://en.m.wikipedia.org/wiki/Endowment_effect Given the cash, would you buy the stock outright? If not, sell.
- gowld 5y ago
  Real numbers are much more intuitive -- It's easier to find a buyer for $500 for 1 share than $3000 for one share. (And extremely low prices are subject to non-trivial rounding error in per-share prices) That's why companies try to keep their stock between $10 and $500, using splits or reverse splits.
floatinglotus 5y ago
It means absolutely nothing technically, but it does cause a short term spike in value because companies only do this when they are doing extremely well. So it is a confidence check. Small investors can now buy individual shares of the stock and there are some small changes as a result of companies that are part of the Dow Jones, and other stock groupings. In the short term the volatility will likely increase, expect single digit up/down fluctuations every day for a bit. This is all my experience, thoughts, etc. AMZN is a great stock. Most people are not aware of the key assets of the company.
qiskit 5y ago
> Anyone know what a stock split typically means for current shareholder value? Theoretically nothing. Example, you own 1 HN stock trading at $1000 ( total value of $1000 ). HN has a stock split of 10-1. Now you own 10 HN stock trading at $100 dollars ( total value of $1000 ). Lets imagine that HN stock is popular and lots of retail investors want to buy HN stock but only 10% of retail investors can afford $1000 for 1 share. But 80% of investors can afford to pay $100 for 1 share. So you can bring in more retail into the mix by splitting the stock. Netflix and Tesla are examples of stocks that did spectacularly well after stock splits. But we are in a stock bubble and most stocks have done well so can't really credit the stock split for the boost in price. No guarantee amazon will do well. Especially if the overall market tanks, amazon will go down with the market. Berkshire class A is an example of stock that buffet refuses to split and it's trading at $500,000 per share. Fair to say that most retail investors can't afford to buy one share. Buffet did create a class B stock that has split to make it affordable for retail investors. There is also something called a reverse stock split where many stocks are converted into fewer stocks in order raise stock prices. This is sometimes done to meet with stock exchange listing rules ( minimum share price ).

awb 5y ago

It just means that the price of an individual stock is too high for the average investor to be able to purchase it. AMZN closed today at $2,782.94. If they did a 20:1 split today, that means if you owned 1 share @ $2,782.94, when you wake up in the morning you would now own 20 shares @ $139.14 (20x the shares @ 1/20th the original price). It can lead to a slight bump in stock price because it's easier for average folks to buy a $139.14 share than a $2,782.94 share. More demand -> prices go up. However, macro conditions like the US economy, world news, or news that affects the business directly are probably going to have a greater impact on price than a stock split.

s1artibartfast 5y ago
>It can lead to a slight bump in stock price because it's easier for average folks to buy a $139.14 share than a $2,782.94 share. This is true but one of the stupidest things in the market. Some retail investors have not concept of fundamentals. I have met some myself that don't understand that stock price is a function of the number of total shares.

czzr 5y ago

Theoretically a stock split doesn’t change anything - let’s say you used to have 100 shares valued at 10 dollars each, and the company decides to change that to 200 shares at 5 dollars. You still have the same amount of value (1000 dollars). So why do it? Usual reason is to make trading a bit easier - now you can sell 1 share at 5 dollars, rather than having to sell 1 share for 10, which might make it easier to find a buyer.

imwillofficial 5y ago
In the past has this been a net gain? Got RSUs vesting this year and trying to decide to sell or keep.
- floatinglotus 5y ago
  If you work for the company you should keep your shares and vest as much as possible. The split has no impact on you in reality. If you work there you are in for the long haul and you’re going to do well given the current trajectory.
  - deleted 5y ago
    [deleted]
- geraldwhen 5y ago
  https://en.m.wikipedia.org/wiki/Endowment_effect https://en.m.wikipedia.org/wiki/Endowment_effect Given the cash, would you buy the stock outright? If not, sell.
gowld 5y ago
Real numbers are much more intuitive -- It's easier to find a buyer for $500 for 1 share than $3000 for one share. (And extremely low prices are subject to non-trivial rounding error in per-share prices) That's why companies try to keep their stock between $10 and $500, using splits or reverse splits.

floatinglotus 5y ago

It means absolutely nothing technically, but it does cause a short term spike in value because companies only do this when they are doing extremely well. So it is a confidence check. Small investors can now buy individual shares of the stock and there are some small changes as a result of companies that are part of the Dow Jones, and other stock groupings. In the short term the volatility will likely increase, expect single digit up/down fluctuations every day for a bit. This is all my experience, thoughts, etc. AMZN is a great stock. Most people are not aware of the key assets of the company.

qiskit 5y ago

> Anyone know what a stock split typically means for current shareholder value? Theoretically nothing. Example, you own 1 HN stock trading at $1000 ( total value of $1000 ). HN has a stock split of 10-1. Now you own 10 HN stock trading at $100 dollars ( total value of $1000 ). Lets imagine that HN stock is popular and lots of retail investors want to buy HN stock but only 10% of retail investors can afford $1000 for 1 share. But 80% of investors can afford to pay $100 for 1 share. So you can bring in more retail into the mix by splitting the stock. Netflix and Tesla are examples of stocks that did spectacularly well after stock splits. But we are in a stock bubble and most stocks have done well so can't really credit the stock split for the boost in price. No guarantee amazon will do well. Especially if the overall market tanks, amazon will go down with the market. Berkshire class A is an example of stock that buffet refuses to split and it's trading at $500,000 per share. Fair to say that most retail investors can't afford to buy one share. Buffet did create a class B stock that has split to make it affordable for retail investors. There is also something called a reverse stock split where many stocks are converted into fewer stocks in order raise stock prices. This is sometimes done to meet with stock exchange listing rules ( minimum share price ).