Amazon, Google and Tesla - These companies have something in common from a stock market perspective. Not only that they are listed on Nasdaq, but also that all of them will soon split their shares.
An Amazon share over the last five years; Image: Google Finance
The value of the shares seems to rise almost endlessly of the big companies. Amazon stock is currently worth $3296, Tesla stock is worth $1089 and Alphabet stock is now also at $2795. That is almost barely affordable for an average citizen. That's why the companies have decided to split their respective stocks.
What is stock splitting?
The stock is split in a certain ratio. For example, Apple split their stock in 2020 at a ratio of 4:1. This means that four times more shares came into circulation for a lower value - four times less in this case. The investor who previously owned the shares is not devalued. He gets three more shares for each share he owned before. Thus, the value of the share remains with the investors and the value of the company does not decrease.
In what ratio will the above companies split their stock?
Tesla has already announced that they will be asking all of their investors if it is okay for the company to split the stock in a 6:1 ratio. This way, according to the SEC (Security Exchange Commission), the company can pay out dividends in the form of shares, rather than cash, as known from other companies.
Google (or Alphabet) will also divide their stock in a 20:1 ratio. So the value of a share will be reset to about $140. According to Alphabet, the company also wants to attract smaller investors.
Amazon is also following suit. One share currently costs over $3000. Two days ago, it was announced that the company would also split the stock in a 20:1 ratio. The value of the stock will be reset to $165 after the split.
When will the splits take effect?
Amazon will finally split the stock on June 3, 2022, after the market closes. Google will also split the stock on July 1 after the market closes. At Tesla, however, little is known yet about when or if the stock will be split at all. Currently, they are still asking investors if it's okay for them.
For more questions you'd like answered, don't be afraid to post them in the comments. We will answer every one.
Comentarios