Appleannounced in itsthird-quarter earnings callon July 30 that it had approved a four-for-one stock split.
This would make thefifth time the iPhone maker split its stock– and the first timesince 2014.
Astock buyback, for example, decreases the number of outstanding shares, increasing the value of each.
But when share price reaches a certain threshold, a company may decide to split its stock.
Read on to learn what a stock split means for companies and investors.
What is a stock split?
A stock split is a fracturing of the company shares in circulation.
This causes more there to be more shares to be in circulation, but at a lower price.
A stock split often signals current and upcoming growth for the company.
After Apple’s four-for-one split, shareholders will have four times the number of shares as before.
Apple stock closed at $438.66 on Tuesday.
Why do companies split their stocks?
Basically, it’s optics.
The last time Apple split its stock was on June 9, 2014.
When trading stopped, shares were priced at$645.57.
Then the seven-for-one stock split took effect, lowering the price to approximately $94.
Mathematically, the company’s overall market cap remains unchanged.
Nevertheless, it can be effective.
Apple’s stock price increased by approximately 10% on Friday after the split was announced.
When will Apple’s stock split?
At the end of trading on Aug. 24, Apple will initiate its four-for-one split.
And the company’s stock will begin trading for one-fourth of its previous value starting on Aug. 31.
