Stock Split Explained


A lot of people have been curious about whether or not they should buy Apple shares and/or Tesla shares before or after they split. The curiosity has led to so many people jumping to buy, as well as having debates on what to do vs what not to do. Honestly, I'm just happy to see so many young men and women be interested in the topic and taking the time to research the stock market. I wanted to weigh in and give my followers my perspective as an active Stock Investor.


First starters, What’s a stock split? Simply put, a stock split means a company has chosen to divide existing shares into two or more shares. So if a stock is set to split 4 to 1, that means that for every share you hold after the split, each share will be worth 1/4 of what it was previously. So let’s say if Apple is trading at $400 per share and you currently hold 1 share after the split you'll have 4 shares each worth $100 (or more). So for example, let’s say Susie buys one share today (before split) for $400 and Joe buys 4 shares on September 1 (after the split) for $100 a piece, both Susie and Joe will have four shares in Apple after the split valued at $400 total. (This example is assuming that the price will be the same after the split, which I highly doubt)

What are the benefits of buying before split vs after? Well, the benefit of buying before the split is that it may save you money, make you more money, and get you more shares! "Ayanah that's dumb how?" Well, Sis, (or Bro?) Let's say Susie (The name just seems to fit, okay?) has $500 to invest and on Monday, August 24th before the close of business, she takes that $500 and purchases 1 share of Apple which is now about $498. Then, on August 31st, her $500 will have gotten her 4 shares at $125 a piece! Now let's say she waited until after the split to invest the same $500, but when she went to purchase a share, the stock value went up from $125 a share, to $217 a share, now how many shares will she get by investing her $500? Two and a fraction.

A benefit of buying after the split is just that it's cheaper. Everyone doesn't have hundreds of dollars laying around to invest and let sit somewhere for however long is necessary, so being able to purchase a whole share or get more for your money buying a fractional share, maybe a better solution for some.


So will owners of Apple stock who purchased before the 4-to-1 split have four times the amount of shares once the stock splits? Yep. Say you own 10 shares of Apple today. When the stock splits 4-to-1 in late August, you’ll then own 40 Apple shares. Same with Teslas 5-to-1 split.


When does Apple’s shares split? Apple will split its shares 4-to-1 on August 31, 2020. The deadline to purchase before the split is August 24th at I think 4 pm? When does Tesla split? It splits on August 31st as well and the deadline to purchase was August 21st.


So why are they splitting and what are the benefits ??

This will be Apple's fifth time splitting since it went public in the 80s. They want to appeal to a broader audience while being affordable.

The split will reduce Apple’s current share price by a factor of four, making it look cheaper. This could entice new buyers to snap up Apple shares because shares will be cheaper to acquire. Same with Tesla, they are always making decisions to appeal to the mass market, and splitting can get them more investors.


Hopefully, this helped explain a little or a lot about what's happening!


Where can I buy stock/shares? I use Acorns, Cash App, and Robinhood to purchase stock. (Yes I use all 3) but you can choose which one is right for you. Cash app is easiest for beginners, then Robinhood, then Acorns. Below are my links if you’d like to sign up and start investing in stock for yourself!


Do what you can, use what you have, start where you are. Always.

Robinhood (When you sign up, we both get a free stock!)

https://join.robinhood.com/ayanahh1

Acorns

https://acorns.com/invite/76Q2K2

Cash App

https://cash.app/app/PDTFBZH


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