Why Apple and Tesla has

split their stocks?

Why any company does it?

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Apple and Tesla has announced
stock splitting

“On July 30, we also announced a four for

one split of Apple common stock and trading
will begin on a split adjusted basis on August
31, 2020”

(“Tesla”) announced today that the Board of

Directors has approved and declared a five-
for-one split of Tesla’s common stock in the
form of a stock dividend

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 What does stock splitting mean?

• A stock split is a decision by a company in

which a company increases the number of
its outstanding shares by issuing more
shares to current shareholders.

• The primary motive of a stock split is to

make shares seem more affordable to small
investors.

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Let’s take Apple Case
interesting story
Current Apple stock price = $500

No. of Apple shares you own = 10

Total value of shares you own= $5,000

→ Apple has announce 4 to 1 split. Means:

Stock price will become = $125

No. of Apple shares you own = 40

Total value of shares you own= $5,000

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But why companies do stock splitting?

• To lower the stock price to make stock

more affordable for small investors

• It increases liquidity in the market,

providing higher flexibility in trading

• Enhance investor’s interest about the

future, having a positive effect

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As per a Research

In August 2003 Mr.Ikenberry from

University of Illinois looked at companies
from 1990 to 1997. His research included
2-for-1, 3-for-1 and 4-for-1 stock splits.
His results were startling.

Shares of split stocks on average

outperformed the market by 8% the
following year and 12% over the next
three years.

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As per Nasdaq

Academic research in 2009 found that

liquidity improvements following stock
splits reduced average companies cost of
equity capital by 17.3%, or 2.42
percentage points per annum, providing
a non-trivial economic benefit to
corporates and investors.

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 Fun Fact

Walmart, for instance, has split its shares

as many as 11 times on a 2-for-1 basis from
the time it went public in October 1970 to
March 1999.

An investor who had 100 shares at

Walmart’s initial public offering (IPO)
would have seen that little stake grow to
204,800 shares over the next 30 years.

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 Stocks doing splits outperform the market,
typically as early as the announcement of a
split- Nasdaq

Sources: Nasdaq Economic Research, FactSet, Bloomberg

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