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Apple Announces 7 For 1 Stock Split
- Osmium 12y agoI'm curious, but how would a company arrive at the number '7'? Is it somewhat arbitrary? Any reason you'd want it to be e.g. prime?
- ninkendo 12y agoI'm sure they had a target price in mind (something that would be low enough to attract investment but high enough to not seem cheap) and just split the appropriate amount to get that number.
- MichaelGG 12y agoThat's just so... wrong. I know some investors are going off things like that but doesn't it bother anyone that such an important part of finance depends on people looking at numbers in a totally irrational way? Like, simply not even doing the math. Even on investment sites, I've seen people say "it's crazy that foo is at $20 but bar is at $50". It's as dumb as someone saying they prefer Zimbabwe Dollars cause it's easier to become a trillionaire.
- speeder 12y agoWhen I heard the number in my head it was obvious because I remember the price being 700 (thus 700/7 = 100) now I checked, and it is currently 500something, but I think their peak was near 700, what I can guess from the real information, and from my "remembered" information (that is kinda important anyway, prices changes tend to be a lot about psychology) I guess that they are aiming for a 100 USD share price in some medium term.
- grecy 12y agoCan someone please explain this like I'm 5. If I currently have 10 Apple shares, what will happen after the split? Is the value of each share expected to go up or down as a result of this? Would now be a good time to buy? ( or, at least, better than last week before this was announced?)
- calcsam 12y agoYou now have 70 shares. Price is expected to decrease to 1/7 of previous level.
- grecy 12y agoWill the dividend paid per share also decrease by 1/7?
- pbreit 12y agoYes, but math/wording not quite right. It will decrease by 6/7 (or be 1/7 of what it was).
- mikeyouse 12y agoYep. For the sake of the math, I'll use a 5:1 split. Day 0: Company trading for $1/share with 100 outstanding shares -- Market cap = $100. They are offering $0.05/share dividends -- Total dividend = $5 Day 1: Stock split at 5:1 Day 2: Company trading for $0.20/share with 500 outstanding shares -- Market cap = $100. They are offering $0.01/share dividends -- Total dividend = $5
- opendais 12y agoYes. Dividends are % based.
- czr80 12y agoYes. Basically, a stock split changes nothing about the value of the stock. However, it might lead to a slight rise in the stock price since small investors will now find it easier to buy, and so total demand for the stock might be a bit higher.
- chrsstrm 12y agoThis article has a little more information, stating that this quarter's dividend will be exactly $3.29 per share of common stock for all shareholders as of 5/12/2014. http://www.streetinsider.com/Dividend+Hike/Apple,+Inc.+(AAPL)+Tops+Q2+EPS+by+$1.44%3B+Announces+7-for-1+Stock+Split/9404636.html http://www.streetinsider.com/Dividend+Hike/Apple,+Inc.+(AAPL...
- jrochkind1 12y ago> Apple will hit up the debt markets for more dollars, it being cheaper to use other’s domestic cash than its foreign reserves Can anyone explain why this is so? Because they are somehow getting a higher interest rate return on their reserves then they'd have to pay to borrow? (That would seem pretty impossible). Because they'd have to pay taxes if they use the foreign reserves? Something else?
- zrail 12y agoIf they repatriate the foreign reserves they have to pay taxes. Taxes are more expensive than interest rates (right now).
- VonGuard 12y agoTaxes and delays make it easier and faster to get debt than to move a couple billion from, say, France or China, to the US. It's complex, but there's a lot of stuff explaining this in other comments around here. I'm sure someone will do the break down again.
- pbreit 12y agoTaxes. US gov wants to take something like 35% in taxes of "repatriated" earnings. http://www.wired.co.uk/news/archive/2013-05/2/apple-borrowing http://www.wired.co.uk/news/archive/2013-05/2/apple-borrowin...
- r00fus 12y agoMaybe the proper framing is that Apple (through Braeburn Capital) hid this money in offshore tax shelters much like Google and pretty much any other large corporation does. Bringing it back simply allows Tax authorities to "see" it again. Perhaps the fact that it's even possible for companies to shelter the vast bulk of their earnings from tax is the problem in the first place?
- protomyth 12y agoApple does earn a lot of money overseas.
- cmpqu 12y agoThe stock is up 36 points or 7% in after-hours. I would be short. These moves from management reek of desperation and don't give me much confidence. They missed big on ipad sales
- pitnips 12y agoSome companies certainly split their stocks to encourage demand, but I don't think any do it for "desperation." As for Apple, they've proven time after time they don't really care about short-term expectations.
- deleted 12y ago[deleted]
- sscalia 12y agoThis is the last chance to get in before they release two more disruptive products. Wearable + Television product. Get in now. It's quite literally the surest bet in the market.
- pitnips 12y agoAll that has been priced in for some time.
- seizethecheese 12y agoNope. It's only a sure bet if these products will beat expectations, and using your comment as an example, I think it's hard to imagine that expectations are not high.
- pbreit 12y agoI'm close to piling on the anti-Tim Cook bandwagon. Everything he does seems to have no relation to product (buybacks, splits, dividends, environment, supply chain cleansing, repatriation taxes, etc.).
- IBM 12y agoApple isn't working on your schedule.
- seizethecheese 12y agoWhat about you, IBM?
- mwfunk 12y agoThat's more of a combination of what the press is writing about, plus the fact that he's much more open and forthcoming about that stuff than his predecessor, than it is an actual observation about what he's spending his time on.
- snowwrestler 12y agoTim Cook has never been a product guy and never will be. He's not Steve Jobs; that doesn't mean he can't succeed as CEO.
- Oculus 12y agoIsn't the goal of Apple's huge piles of cash to finance & consolidate their manufacturing as well as distribution? Could we interpret this as a signal that there aren't any new products coming down the line that would require such expenditures? By new products I mean the release of a totally new line (e.g. iPhone 1) rather then an iteration upon a current line (e.g. iPad mini).
- IBM 12y agoYou can interpret this as a signal that Apple has a lot of cash, and they make a lot of cash. CapEx and R&D have been steadily rising these past few years and Tim Cook has explicitly said new products would be released in 2014.
- Oculus 12y agoYou're absolutely right, with the margins Apple enjoys, they could just have more money then they know what to do with.
- Cookingboy 12y agoIt is one of the goals, and they are still actively investing in that area, for example the sapphire plant they recently invested/built. However given how much cash they have ($150bil+), spending all of that on operation and manufacturing in a short amount of time is actually infeasible. A state of the art chip fabrication plant would only run you around $2bil these days, even if you build it in an expensive country like the U.S (kinda tells you how over-valued WhatsApp was huh), so even if Apple decides to build 20 of such plants (Intel only has around 10, and a lot of them are older ones)), they STILL have over $100 billion in CASH that they don't need, which is still more than any other tech companies' cash reserve.
- Oculus 12y agoHow is a company like Amazon able to constantly funnel cash back into their company while Apple's reserves just grow? Do you think it's the nature of the business (small margins for Amazon, giant for Apple) or different company priorities?
- melling 12y agoRather than pay a dividend, wouldn't it be better to take less margin on a low-end iPhone, iPad, or Mac to increase market share? The iPhone, for example, will always have a small global market share because they only sell high-end phones. A phone that's $50 cheaper would translate in tens of millions of phones sold.
- camillomiller 12y agoiPhone 5s actually proved the exact contrary seems to be true...
- melling 12y agoDo you mean the 5c? I'm pretty sure that the margins are high on that phone. It's still expensive for what you get.
- camillomiller 12y agoNo, I mean that Apple sold shiploads of iPhone 5s without lowering the price at all. It was even more expensive than the iPhone 5 in many countries
- calinet6 12y agoThe 5c was a case of a missed fashion trend, not price.
- micampe 12y agoElaborate please?
- calinet6 12y agoI'm surprised the opinion is controversial. Every complaint I've seen against the 5c was that it looked unprofessional, was too colorful, or looked cheap. People didn't buy the 5s over the 5c because it was expensive or offered more features or power. They bought it because it was the only option that looked like a phone and didn't attempt to call attention to itself as a fashion statement. Apple banked on the lower price offering requiring further differentiation and uniqueness to sell well. In fact, it requires less differentiation and more generic appeal to be acceptable to the larger market. They designed themselves into a tight niche, instead of opening themselves to a real market. Big mistake.
- dudus 12y agoDo they save money on dividends if they have more shares because of rounding? eg: let's say they have 100M shares and will pay US$ 2.15 per share. That's US$ 215M dollars paid. Now they do a split and those 100M shares become 700M, dividend prices also are divided by 7 and become US$ 0.3071428571 per share, then they decide to round down to 30 cents per share. It means they paid the same dividend as before but the total spent was US$ 210M In other words they paid the same amount as before but rounding it down they saved 5M dollars or 2.3% of the money they could have spent otherwise. If so this could also explain why 7. Since it's a prime number there are more chances that the division won't be round.
- cecilpl 12y agoNo.
- camillomiller 12y agoWhat do you think: one should buy now or after the split?
- encoderer 12y agoOne should not try to time the market. Dollar cost average into it.
- seizethecheese 12y agoDollar cost averaging only suits to lower volatility a bit, but has nothing to do with returns. This can help you as much as it can hurt you. If you're plunking down significant cash into a single tech stock then I don't think volatility is your main concern.
- encoderer 12y agoYou're either the kind of person who has an investment thesis that you're executing on, trying to time the market for optimal returns, or you're the kind of person who should cost average into the stock. Based on the question the GP asked, they're in that second group.
- dlubarov 12y agoIf you make the random walk assumption then DCA doesn't improve expected returns. Those who expect higher returns are (perhaps unknowingly) relying on unjustified cyclic patterns in prices and trying to exploit that inefficiency. DCA can reduce risk in theory, but only if you consider USD a risk-free asset. If you really want to minimize risk you should buy real estate funds, commodity funds, etc. based on your expected future consumption.
- seizethecheese 12y agoFalse dichotomy.
- kens 12y ago
- dpcheng2003 12y agoI wonder if there's a lagging indicator of tech bellwether decline in innovation/disruption when they introduce a dividend. For example, Apple had a dividend in 1995. Then in 1996, Jobs came back and nixed it. Microsoft issued its first dividend in 2003. Cisco in 2011. Oracle in 2009. As a former ibanker, I should be all for financial engineering. But when companies can do "actual" engineering, I'd prefer to spend money on growth if possible. If not... then, I guess the dividend makes sense, hence my earlier assumption.
- dangoor 12y agoWhen Jobs came back to Apple, Apple was not in solid financial health. That's not a good time to have a dividend. If they needed to deploy all of their cash for growth, I'm sure they would. The trouble is that they have so much cash that it's likely not clear how to deploy it in a way that is true to Apple (ie they could buy some big companies or add 100 products to their portfolio, but that's not the way they roll)
- fuzzythinker 12y agoThe only reason I can think of is to be listed in the Dow. Being too expensive is the reason it isn't in it yet. $75 is slightly below the current average Dow stock prices of $77, but should it double in price in the future, it still won't be too expensive for the Dow.
- philmcc 12y agoAs stated elsewhere, it allows small investors to buy in -- and the stock advance of their AppleTV release it could mean that they are expecting a ton of attention from the lay investor. The dates are significant: The split happens the evening of WWDC launch.
- philmcc 12y agoQuestion: The split for existing shareholders is June 2nd. The stock starts trading with split values June 9th. What happens to trading from June 2nd-June 9th, during WWDC+ and after they announce their TV?
- ghshephard 12y agoI've read this entire thread once, then scanned it a second time for the word, "splits" - as of 124 comments, nobody has suggested a rational reason as to why Apple would split their stock. There were two implications of splitting the stock, one was that options plays (which normally trade in groups of 100, though some more expensive "minis" are also available) become more inexpensive, and some hand waving about "more people can afford the stock, therefore more demand, therefore greater impact on the price" - which I've heard for 20 years, and I believe has been fully debunked (the counter argument is that if the underlying stock has an actual value, and greater availability pushes stock above that value, then rational people can profit by shorting the stock/selling it until it reflects the actual value) I'm always confused when an otherwise sane company starts playing with this type of financial engineering, the only people who really seem to profit will be the team who manages the split - and I often wonder whether a split is just some way of rewarding them with business, in return for some type of off books advantage. Is there any other rational reason why a company might want to split? Does it give them some way of controlling their shares more effectively by splitting them -I.E. When the stock splits, do they get an enumeration of their shareholders that they might not otherwise have? Anybody been involved in a stock split that can explain what the behind the scenes reasons totally not related to the "stock is cheaper so more people can buy it" excuse is?"
- YZF 12y agoIt's just about the psychology of price. People are influenced by the share price. A share price of under a dollar seems cheap and a share price of 500 dollars seems expensive regardless of the actual market cap.
- derekp7 12y agoIt's just like the psychology of Daylight Savings time -- even though people could get up an hour early in the summer, they won't unless the clock tells them it is time to get up.
- lawnchair_larry 12y ago
- gnicholas 12y agoWithout weighing in on why AAPL decided to split or whether it was a good idea, I'll say that I'm happy they did it. I make charitable gifts by donating appreciated stock (more tax-efficient than cash), and this split will allow me to make more granular donations than before. I don't always want to make donations in increments of $500.