Insights + Resources

What Are Stock Splits?

Aug 24, 2020

Two high-profile companies—Apple and Tesla—have announced stock splits in the past few weeks, which makes it a great time to discuss what’s involved when a company announces a stock split.

Remember, any companies mentioned are for illustrative purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, timeframe, and risk tolerance.

In an earlier video from Financial Advisor and Managing Director Ed Doughty, he touched base on how these stock splits have altered the market. To hear more thoughts as they come out, feel free to subscribe to your YouTube channel.

The Securities and Exchange Commission says, “Companies often split shares of their stock to try to make them more affordable to individual investors. Unlike an issuance of new shares, stock splits do not dilute the ownership interests of existing shareholders.”1

Apple Inc. announced that the 4-for-1 split of its common stock, and trading is expected to begin on a split-adjusted basis on August 31. Tesla Inc. plans a 5-for-1 split, which also is scheduled to begin trading on a split-adjusted basis on August 31.2,3

When a company declares a stock split, a shareholder’s total market value will remain the same. For example, say you own 100 shares of a company that trades at $200 per share. If the company declares a 2 for 1 stock split, you will own a total of 200 shares at $100 per share immediately after the split. If the company pays a dividend, your dividends paid per share will also fall proportionately.4

There are also “reverse stock splits.” If a company declares a reverse split, it plans to reduce the number of outstanding shares, such as a 1 for 2 split. Reverse stock splits tends to occur with companies that believe their stock price is too low to attract investors.5

Will more companies consider a stock split? That’s hard to say. Some companies prefer a higher stock price. Perhaps the best-known high-priced stock is Warren Buffett’s Berkshire Hathaway Inc. It’s Class A shares trade for more than $300,000 a share.6

In the days leading up to stock splits, you’re likely to hear a lot of opinions about the companies. Over the years, we have found that it’s best to ignore that chatter and stick with an investment approach that’s in line with your personal situation. Talk to a financial advisor today about your situation.

Tags: , ,

More Insights

Jun 9, 2025

You’re beginning to accumulate substantial wealth, but you worry about protecting it from future potential creditors. Whether your concern is for your personal assets or your business, various tools exist to keep your property safe from tax collectors, accident victims, health-care providers, credit card issuers, business creditors, and creditors of others. To insulate your property … Continue reading “Estate Planning – Protecting Your Assets”

Jun 6, 2025

You know how important it is to plan for your retirement, but where do you begin? One of your first steps should be to estimate how much income you’ll need to fund your retirement. That’s not as easy as it sounds, because retirement planning is not an exact science. Your specific needs depend on your … Continue reading “Estimating Your Retirement Income Needs”

Jun 4, 2025

As June begins, markets continue to navigate a complex landscape shaped by trade policy shifts, an uncertain economic and earnings outlook, and bond market headwinds. Several key developments in recent weeks may have implications for markets:

Apr 4, 2025

April showers came a month early as stocks fell in March. Tariffs were the primary cause of the market jitters, although that uncertainty became too much for markets to shrug off once economic data started to weaken.

Apr 2, 2025

A successful investor maximizes gain and minimizes loss. Though there can be no guarantee that any investment strategy will be successful and all investing involves risk, including the possible loss of principal, here are six basic principles that may help you invest more successfully.

Insights + Resources >