Apple executed its 7-for-1 stock split on June 9, bringing down the stock price to around $92 per share. Stock splits usually entice investors, but they neither add nor destroy value because the overall equity remains the same. However, the psychology behind them can work wonders, creating more demand for the stock.
Why did Apple split its stock?
Companies usually go for stock splits for three reasons. One, liquidity for the stock rises when the number of shares available for purchase goes up. It results into lower cost of trading. Two, a lower stock price makes it more attractive and affordable to smaller investors. People who previously wanted to buy Apple (NASDAQ:AAPL) shares, but couldn’t purchase due to above $600 price can now own Apple shares for just around $92. The third reason is the Employee Stock Options Program (ESOP). With ESOP, companies pay their employees with its own stock. A lower stock price would give the Cupertino-based company more leeway to pay its people.
It's no secret that this year has been a volatile one for the markets. The S&P 500 is down 18% year to date, while the Nasdaq Composite is off by 27% year to date. Meanwhile, the VIX, a key measure of volatility, is up 49% year to date at 24.72. However, it has spiked as Read More
It’s Apple’s first stock split in nine years. While announcing the split, the company said that it wants Apple shares to be more accessible to investors. Jason Mengel of Fusion Capital believes that the iPhone maker is positioning itself to become a part of the Down Jones Industrial Average Index, one of the world’s most popular equity indexes.<