Apple Announces 7 For 1 Stock Split

http://techcrunch.com/2014/04/23/apple-announces-7-for-1-stock-split-boosts-its-dividend-8-adds-30b-to-its-buyback-program/

by Kopion • 12 years ago

173 182 12 years ago

techcrunch.com

Osmium• 12 years ago

I'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• 12 years ago

I'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• 12 years ago

That'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• 12 years ago

When 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.

grecy3• 12 years ago

Can 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• 12 years ago

You now have 70 shares.

Price is expected to decrease to 1/7 of previous level.

grecy3• 12 years ago

Will the dividend paid per share also decrease by 1/7?

pbreit4• 12 years ago

Correct. In theory it doesn't make much of a difference (ie, 20 nickels vs 4 quarters). Investors generally perceive it to be management having a bullish outlook on stock price. And there is a small liquidity benefit (although AAPL already pretty liquid).

theandrewbailey• 12 years ago

The narcissist in me thinks it will go down further than 1/7th the previous price, because whenever I hear about Apple stock, it's going down. Apple sold 5 million iPhones, stock goes down; Apple announces new product, stock goes down; etc...

pitnips6• 12 years ago

A split has absolutely zero impact on the worth of your shares. The primary reason companies do it is to attract investors who are more comfortable paying lower prices for the shares, thus increasing demand and driving a higher price.

mikestew2• 12 years ago

Nothing changes except the number of shares you own. The total amount of money you have in AAPL will remain the same. Your dividend check will remain the same (assuming an equal percentage the next time a dividend is announced). You'll own more shares, but each individual share will be worth less (but again, the total worth of your AAPL stake will remain the same).

Will it go up or down? (EDIT: apparently "up" if afterhours is any indication.) Used to be, back in the dotBomb days, a split announcement drove the price up. Now remember from above that nothing has really changed. AAPL's market cap is still the same, there's just more shares out there. One thing that has changed is that Joe Sixpack doesn't need to drop $50K to buy a lot of 100 shares. But Joe doesn't drive the market, institutional investors do. And when Fidelity's mutual fund is buying $10,000,000 worth of AAPL, they don't care if the share price is $1 or $1000. So there isn't much rational reason for the price to go one way or another.

A split could be taken as "management thinks...". I don't know, could have some weight to it, could not. At the end of the day, as someone who has traded stocks for over 15 years and traded AAPL since about 2003 (yea, me! Mostly...), I'm not making any decisions one way or the other on this news. I'll keep an eye on AAPL for sure, though, just in case the market disagrees with me.

Would now be a good time to buy? No, yesterday was a good time to buy (that's okay, I didn't either) because it's up 8% in afterhours. Earnings are tomorrow, and never ever never buy AAPL the day before earnings (it almost always go down the next day). WWDC is coming up, so it could be "AAPL announcement means they'll soon own the $WHATEVER market. Buy!" or it could be "AAPL announcement shows that a post-Jobs Apple is doomed. Doomed!"

No offense, but if you have to have a stock split explained to you then you're probably not suited to trying to time the market on AAPL. Hell, I've been trading AAPL for over ten years, and I'm not suited to trying to time it (I've done it, and mostly come out ahead, but I attribute it to getting lucky and not to my 133t trading skillz). Just hang on to it, see how it shakes out, and if it hits a good price for you at some point, sell it. Or if it takes a dip (say, after earnings maybe?), buy some more. If it opens up 8% tomorrow morning, you might even consider selling what you've got. Then if it dips after earnings, buy some more then.

But I am in no way, shape, or form a financial adviser. My advice isn't even worth what you paid for it. For entertainment purposes only, do not under any circumstances make trades based on what some anonymous dumbass on the internet says, because we're a dime a dozen, and if I were so smart I'd be hiking the Cascades today and not working a day job.

grecy3• 12 years ago

Thanks for the detailed reply. I appreciate the honest answer.

I have a lot to learn, this much I know.

badusername• 12 years ago

Would now be a good time to buy? No, yesterday was a good time to buy (that's okay, I didn't either) because it's up 8% in afterhours. Earnings are tomorrow, and never ever never buy AAPL the day before earnings (it almost always go down the next day). WWDC is coming up, so it could be "AAPL announcement means they'll soon own the $WHATEVER market. Buy!" or it could be "AAPL announcement shows that a post-Jobs Apple is doomed. Doomed!"

That's wrong. This announcement came as part of the earnings announcement - it is already out and they did have a great quarter (hence the 8% pop).

To another point, I would expect a slight appreciation from the stock split. Apple is one of the most traded retail stocks and affordability could certainly provide a bump to the stock.

jrochkind1• 12 years 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• 12 years ago

If they repatriate the foreign reserves they have to pay taxes. Taxes are more expensive than interest rates (right now).

VonGuard• 12 years ago

Taxes 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.

pbreit4• 12 years ago

Taxes. US gov wants to take something like 35% in taxes of "repatriated" earnings.

http://www.wired.co.uk/news/archive/2013-05/2/apple-borrowin...

r00fus• 12 years ago

Maybe 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?

darkarmani2• 12 years ago

US gov wants to take something like 35% in taxes of "repatriated" earnings.

You are surprised that the US wants to tax earnings? The US taxes everyone's earnings. If they want to keep it overseas they can avoid the tax. If they want to bring it back they need to pay a tax on the amount minus the credit for the foreign tax already paid. They would have been taxed if they earned the money in the US, so I'm not sure why this is surprising.

lordgilman• 12 years ago

Yes, you have to pay taxes when repatriating that cash.

dchuk• 12 years ago

It's because of the taxes.

qdog• 12 years ago

I believe it to be the taxes. If they repatriate those dollars they'll pay a significant tax. I believe there are also bills in congress that may someday make it through to address this, but it probably won't be soon. Getting to not pay tax on foreign profits is just bad policy, imho.

guyzero• 12 years ago

They'd have to pay taxes if they bring foreign cash back to the US to pay dividends.

Google floated $1B in bonds earlier this year: http://www.bloomberg.com/news/2014-02-20/google-said-to-plan...

Probably for the same reason.

mikeyouse7• 12 years ago

Because they'd have to pay taxes if they use the foreign reserves?

Yep.

Apple can borrow at somewhere near 2.3%[1] on the public debt markets. They have billions overseas, but if they bring it back to the US, they'd have to pay corporate income tax on it (35%).

They're just biding their time until the Chamber of Commerce lobbyists gain enough influence to get congress to pass an overseas tax holiday to repatriate the money at 15% or 20%. To this end, expect a huge PR onslaught near election time about how much economic stimulus would be provided if we changed the rules about taxes just this once (note: happens every ~10 years).

[1] http://quicktake.morningstar.com/StockNet/Bondsquote.aspx?ci...

pitnips6• 12 years ago

Last tax holiday was the Homeland Investment Act in 2004. HIA II could be an issue worth debate in 2016.

OnyeaboAduba3• 12 years ago

The arguement for the holiday the last time was "job creation" which didnt really bear fruit. Dont think it will happen again unless it is part of a larger tax reform bill.

AnthonyMouse8• 12 years ago

Because they'd have to pay taxes if they use the foreign reserves?

This is the main reason.

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).

This is also a possibility. Apple has extraordinarily good credit. They can consequently borrow at near-zero interest rates. They can then invest that amount of money in some (perhaps only slightly) higher risk security than their own bonds and turn a profit -- and if the money was originally held by a foreign subsidiary then so is the profit from the investment.

MaysonL• 12 years ago

It's mainly a tax thing: to bring the offshore cash to the US, which it would have to do, it would have to pay income tax on it. The combination of deferring this tax and the reduced dividend payout which come from buying back their stock more than pays for the interest on the debt.

WildUtah2• 12 years ago

You got a lot of replies talking about the global taxation of US companies' profits. That is a problem; no other developed nation tries to tax foreign profits already taxed once again at home because it leads to just this kind of problem.

But the really big problem is that the US has the developed world's highest corporate tax rates. At 35% federal and 0-14% state, US rates exceed all other first world jurisdictions. Few big corporations pay that much because the USA has a lot of special credits and deductions that lobbyists for big companies have slipped into the code for themselves, like executive entertainment expenses and "research" or "domestic" manufacturing and oilfield operations and banking interest and such. Foreign profits don't enjoy such deductions at the margin, so the full rate would have to be paid.

President Obama and congressional Republicans have suggested that the rate be lowered and some of the deductions be eliminated. Congressional Democrats and special interests that each want to keep their own favorite deduction have been preventing a deal for years.

It's more likely that we'll just get a overseas tax holiday at 20% or so sometime in the next decade while the system at home remains a mess. Apple can wait it out and see.

tomcorrigan• 12 years ago

no other developed nation tries to tax foreign profits already taxed once again at home

That statement is demonstrably false. I know for a fact that in Australia foreign income is taxed again. Credits are available for some or all of the tax paid in the foreign country depending on the existence and nature of bilateral tax treaties between the two nations. I believe similar schemes operate in most developed nations.

Also of note is that the company tax rate in Australia is 30% but with far fewer special credits and discounts so the effective rate is quite close to the nominal rate.

cmpqu• 12 years ago

The 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

pitnips6• 12 years ago

Some 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.

sscalia2• 12 years ago

This 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.

pitnips6• 12 years ago

All that has been priced in for some time.

encoderer5• 12 years ago

As the stock has languished at $540? Hardly.

seizethecheese5• 12 years ago

Nope. 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.

pbreit4• 12 years ago

I'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.).

IBM2• 12 years ago

Apple isn't working on your schedule.

seizethecheese5• 12 years ago

What about you, IBM?

mwfunk3• 12 years ago

That'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• 12 years ago

Tim 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.

Oculus3• 12 years ago

Isn'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).

IBM2• 12 years ago

You 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.

Oculus3• 12 years ago

You're absolutely right, with the margins Apple enjoys, they could just have more money then they know what to do with.

Cookingboy2• 12 years ago

It 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.

Oculus3• 12 years ago

How 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?

melling7• 12 years ago

Rather 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.

camillomiller4• 12 years ago

iPhone 5s actually proved the exact contrary seems to be true...

melling7• 12 years ago

Do you mean the 5c?

I'm pretty sure that the margins are high on that phone. It's still expensive for what you get.

calinet62• 12 years ago

The 5c was a case of a missed fashion trend, not price.

seizethecheese5• 12 years ago

Apple doesn't want to sell the most amount of phones, the leave that to Android. What Apple wants is to make the most amount of money off of phone sales. I'm sure they've looked at different price levels and determined that a 10% lower price would not increase units sold by more than 10% ( or more accurately 11.11%.)

melling7• 12 years ago

Yes, I know. My point is that if they're just going to give the money back in dividends, maybe they're better off trying to gain market share. At some point, having a global market share of 20% means that a lot of software will be written for the other platform first. More eyes means more ad revenue.

superuser2• 12 years ago

A phone that's $50 cheaper is not appreciably different to a consumer paying $100/mo for 2 years for service. $2600 is not that different from $2550.

melling7• 12 years ago

You are overlooking that in many places in the world, you have to buy the phone outright.

Eleutheria• 12 years ago

I rather sell one watch at $10000 than a thousand watches at $10. Simply put, less customer care and the only customer I care for is probably a king or a president.

Hans Wilsdorf - Founder of Rolex

mwfunk3• 12 years ago

I agree that they can do better than they have in this area, but they are also fundamentally not the type of company that has any ambition to be everything to everyone. In the computer world, they aren't comparable to Toyota or Honda, they're more like BMW or Audi. In mobile, the same holds true to a lesser degree. As a company, there are things they're good at, and things they're not good at. There are things they like to do, and things they don't like to do. If they put too much emphasis on market share, they may get stuck doing things they're bad at so they can accomplish things they don't want to do, at the expense of doing things they want to do, and doing them well.

I don't think I've ever heard anyone make an impassioned argument that BMW absolutely positively must start selling millions of zero-margin $10k subcompact hatchbacks to better compete with Toyota/Honda/etc., or else they're going to die. BMW might do something like this, but it would be because it's a segment of the market they want to get into for whatever reason, not because they feel like they have to. Yet, people make these arguments about tech companies and market share all the time.

melling7• 12 years ago

I've explained it a few times already. The apps add the extra value to the phone. If another mobile OS has better apps, it will gain the edge. This will become particularly important as mobile converges with the desktop.

drp4929• 12 years ago

Dividend amount is usually based on extra cash generated by a company. However, lower margin does not directly translate to less cash generated by the company.

zimpenfish• 12 years ago

In the year-ago quarter, Apple accounted for 77.8% of the mobile phone industry's earnings before interest and taxes. In the fourth quarter of 2013, that figure grew to 87.4%

http://www.fool.com/investing/general/2014/02/13/apples-shar...

Why bother chasing the chimera of "market share" when you already have "total revenue dominance"?

dudus• 12 years ago

Do 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• 12 years ago

No.

camillomiller4• 12 years ago

What do you think: one should buy now or after the split?

encoderer5• 12 years ago

One should not try to time the market. Dollar cost average into it.

seizethecheese5• 12 years ago

Dollar 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.

kens• 12 years ago

Buying after will make your taxes/accounting easier since you won't need to remember what to divide by 7.

Source: SUNW + stock purchase plan + multiple splits = headache at tax time

cynwoody2• 12 years ago

What's really fun is, you bought a stock a long time ago, it spun off some other companies which got acquired by yet other companies, such that you now own several stocks, all attributable to the purchase of that one stock a long time ago. Now you sell some of the resulting stocks, and you need to compute your basis in order to figure the taxable capital gain or loss. This entails looking up the ratios from the various spin-off / acquisition events to determine how much of the original cost to allocate to the sold shares.

dpcheng2003• 12 years ago

I 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• 12 years ago

When 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• 12 years ago

The 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.

philmcc2• 12 years ago

As 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.

philmcc2• 12 years ago

Question:

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?

ghshephard9• 12 years ago

I'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?"

YZF3• 12 years ago

It'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• 12 years ago

It'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.

ghshephard9• 12 years ago

But, if that's the case, then people who are not dealing in pop-psychology, but instead in cold-hearted company assessment would stand to make a lot of money, and, in doing so, would quickly drive the value of AAPL to it's correct number.

ISL• 12 years ago

I'm anything but expert, but here's a set of thoughts:

Consider the opposite extreme, Berkshire-Hathaway, where the stock is deliberately not split in order to attract only those investors with, today, $191,000 to spend on a single share. The argument in favor of such a strategy is to attract only investors who are likely to take a long view of things. It may also discourage selling, as it can't be done piecemeal.

(Yes, Berkshire has a substantial number of Class B shares with diminished voting power that trade in the $100 range after splits, but the company was cajoled by circumstances into issuing them; people were beginning to develop Berkshire-tracking funds.)

If you want your company to be accessible to the little guy, and your company's doing well, you'll have to split sometime. Furthermore, if you're a shareholder and you're interested in shorter-term trading, you might cajole your company into splitting.

GrinningFool• 12 years ago

Why would you care if your company was accessible to the little guy? Those stocks are sold - you never get more money from them unless you issue new stocks, no matter how they are traded in the future. (Stocks seem like a pretty bad deal for the company anyway: get funded via IPO, be forever beholden.)

In fact, they're a liability. So what benefit to a company from increasing the number of people you have to answer to?

erichocean• 12 years ago

people were beginning to develop Berkshire-tracking funds

At the very least, that's proof that the market wants shares that trade at less than 6 digits. It's not the same as "rational", but we do our best.

yeldarb• 12 years ago

One other consideration is that, at its current price, Apple is not able to be considered for inclusion in the DJIA since that index is price-weighted and Apple would account for a huge portion of the index.

After the 7-1 split, Apple will be a likely candidate.

http://www.fool.com/investing/general/2014/04/23/apple-just-...

Eliezer• 12 years ago

Price-weighted? Price-weighted? (Market Economics Fairy bangs head against wall.)

simpleton22• 12 years ago

I can't speak for Mr. Cook, but I wished to myself "please split AAPL" just the other day.

I hold AAPL and I would like to let my dividends roll over via a DRIP managed by my broker. But at current prices, yield, and dividend frequency ($525, 2.3%, quarterly) I would need to hold $90k of AAPL for a dividend payment to buy a single share -- a bit rich for me. But after the split, that number goes down to $13k.

2arrs2ells• 12 years ago

Does your broker allow fractional shares in your DRIP? I hold a couple shares of AAPL in a Vanguard brokerage account and haven't had any problems reinvesting dividends for fractional shares.

PhantomGremlin• 12 years ago

Hopefully your AAPL is in a non-taxable account. Otherwise you are setting yourself up for this [1]:

   If all this seems complicated -- it is. A lifetime
   of DRIP investing may create a morass of tax
   obligations when the time comes to sell the DRIP
   shares, with at least four new cost bases of DRIP
   shares established each year (when dividends are
   reinvested) as well as when any OCPs are made.

The first time I saw my accountant he literally shook my hand when I told him I didn't do DRIP.

[1] http://finance.yahoo.com/education/drip/dspp_plans/article/1...

arg01• 12 years ago

I have not been involved behind the scenes. I'll point out liquidity seems like a likely advantage of splitting shares. You can do smaller trades with a wider audience/more frequently. The added liquidity would also make the shares more valuable to certain classes of traders which may raise the price.

ghshephard9• 12 years ago

Liquidity would possibly be an issues with BRK-A, where 149 shares traded today (though I could make arguments as to why not) - but, AAPL traded 14mm+ shares today. I don't think you would have any problem finding someone to buy your shares at a reasonable spread within seconds. So, I don't buy liquidity as an issue in this situation.

sounds• 12 years ago

Anyone have any more information than I do about the AAPL vs. GOOG question?

For quite a while, AAPL and GOOG traded blows in the mid-hundreds range and both generally rallied 2000-2008. As of right now, they're still quite competitive.

Would the stock split be an attempt by AAPL to avoid the comparison?

malay• 12 years ago

GOOG split in early April to create a third class of shares (Class C) that allows the founders to maintain control the company through their shares (Class B) for the foreseeable future. They had issued so many Class A shares, their 10:1 voting rights were becoming diminished.

Neither company cares about the comparison.

RyanGWU82• 12 years ago

I used to work for a pre-IPO startup that had experienced a pretty big run-up in their stock price. As a result, their new hires were getting options to buy 200 shares at $100 per share. (I made up those numbers, but you get the idea.) They did a big stock split partly to change the numbers in stock option offers. Apparently it was much more enticing to offer candidates options for 2000 shares at $10 per share. Even though the options would have the same total value, they believed candidates would respond much better to an offer of "more options."

ghshephard9• 12 years ago

That's a very interesting and insightful angle - If Apple is handing out $50,000 worth of RSUs to new hires vested over 4 years, then currently new hires get 100 shares. While, in theory, a new employee should be fine with 100 shares or 700 shares, human emotion being what it is...

Though -on the flip side - I'm wondering if an employee of any merit has decided not to work for Apple because they got "100 $500 shares" instead of "700 $71 shares"

phlo• 12 years ago

According to Bloomberg [1], this removes an obstacle for Apple's inclusion in the Dow Jones Industrial Average. The index weights stocks solely by their share price. Splitting up AAPL 7:1 should produce a new share price of around $75, close to the DJI mean of $85.

[1] http://www.businessweek.com/news/2014-04-23/apple-stock-spli...

gnicholas• 12 years ago

Without 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.

Apple Announces 7 For 1 Stock Split

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