Stock Splits Simplified:
-# of shares before split = 100 at $50/share
-Split = 2/1
-# of shares after split = 200 at $25/share
-In order to own the same portion of the company, the stock price goes down to $25/share
-100 shares at $50/share = 200 shares at $25/share
-The value is the same, only the share price changes
-Splits can come in different denominations (e.g. 2/1, 3/1, 5/1, 3/2, etc)
Why do Companies Do This?
-To allow new investors to come in at a lower stock price
-To re-balance their shares
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Love your videos. They are very informative and concise, especially for someone relatively new to the field. Quick question: would the stock price dip similarly to when there is an IPO e.g. stocks get dumped into the market? Or does the influx of new investors buying the lower priced stocks equal this out? Is there a good marker to look at for when to buy/sell? Or like with the IPO, should you wait until all the noise quiets down?
I am new in this field.
So,for example if share price of a company was 100$ and now after share split its price goes very down say becomes 25$,so shall I buy the stock(expecting that the share price will increase) ?
Thanks in advance :)
Can you please tell me other conditions to be looked at.Actually in Indian market,a stock was for Rs1000 per unit,but after share split it is Rs.500 now.
So,is it mean that its price has halved and it is good time to buy ?
I got 2 shares (that I bought at 10:10, total of 20:20) of a company that did a split 1:15.. So they told me that they are going to give me cash because decimals. After the split the company price went around 35.
My doubt is how many cash im going to receive? Im going to receive the original amount of 20:20 or ~what ?
I will never understand why sources tend to make simple concepts such as this one sound so complicated and difficult. I will never understand why I would have to check about 5 different sources before I find one (such as this one) that explains these concepts in English. I checked accountingtools, accounting coach, and investopedia before resorting to youtube, and they made stock splits sound like rocket science.
is there a way to know ahead of schedule when a stock splits? is that a calendar date or announcment? and does the split gain value (stock price) or decrease at a split? my guess is that it has the trend of an IPO, where typically the value drops because there is less demand for it ... ???
There's one thing I just can't wrap my head around. If the purpose of stock split is to keep the stock lower and affordable for new investors, why doesn't the stock price change (or drop) to reflect this change? I see a split happen and the price for the stock is the same or continues to rise. Could you help, Sasha?
I am confused about calculating Market Price for an 8:1 split. There were 39000 shares @ $5 par. For the split I calculated the # of shares using 39000*8=312000 and the par value per share was calculated using 5/8 - .625. How do I calculate the market price per share if market price of common stock is now $100?
Thank you for the prompt reply!! I am just learning this stuff and it can be very confusing. Ok so in Dec 26, 2012. NKE did a 2:1 Split but the stock price didn't drop 50%, in fact it increased.
You do not need increased earnings, or cash flow to split a stock into smaller parts. Are you saying they do it to increase marketability to small shareholders because price is weakening as large shareholders will not support the price any more?
That is not what Warren Buffett teaches us. More cheap owners. More traders mabe. Why would the stock go up and stay up.
You have increased the expenses, but no increased cash flow. No new intrinsic value that you have shown.
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