An initial public offering allows a company to issue shares to private investors. A division of shares is the division of shares held by a company into several shares. This is put in place to increase the liquidity of the shares when they reach a specific accumulation threshold. A common strategy is to divide them into a 2 for 1, 3 for 1 or 4 for 1 ratio, with the shareholder now holding 2,3 or 4 shares on each previous holding.
In the past, several companies have sometimes practiced stock-sharing. Apple shares split in 2014, gaining the share price from $ 645.57 to just $ 92.44. On July 30, 2020, Apple announced a 4-for-1 share split for the fifth time. Already, the company has seen a 10% increase in the price of its shares as a result of the decision.
Why do they want to do it?
It is a matter of optical perception. In technical terms, the value of the accumulated capital for the company remains the same. It only increases the division of outstanding shares. As a result, the price per share is low. Thus, the rates decrease without a tangible impact on the company, thus attracting investors who own shares who want to own a part of the company at affordable prices.
Moreover, it serves the company well to take this initiative. Potential psychological investors would be more inclined to buy 10 shares worth $ 100 than one share worth the same amount. As you invest more and more, the total price increases. This is a win-win for both sides.
What happens to your investment?
Sharing shares does not add any monetary value to your investments. Only the number of shares you now have will be multiplied by a certain multiple. In the case of Apple’s recent 4 to 1 share split announcement, for example, shareholders will find 4 shares for each previous share, for the same dollar value.
What about dividends?
If the stock is divided after the date of recording, the dividend is stipulated as usual. In addition, the amount of dividends per share is reduced. However, the total monetary value of the dividend does not change.
How do we see it?
Sharing shares can reasonably be considered a successful marketing strategy taken by companies to attract investors without any impact on their capital value. As stock rates are low, they see increased buyers boosting demand. Many companies routinely share inventory to achieve that exact effect.
Overall, it is a positive sign that the company sees that the stock price will continue to rise and that is why I would suggest investing in Apple Stock to make the right investment. If we had invested earlier in 2016, then our investment would have multiplied 4.5 times. So imagine and allow Invest to invest in Apple.