Apple and Tesla, two of the most valuable companies in the US, made headlines recently when they both announced stock splits beginning on the same day, August 31.
Apple announced a 4-1 stock split, and Tesla is doing a 5-1.
It means that for each share of Apple stock that an investor owns, they’ll receive another three. In Tesla’s case, four additional shares.
This will be Apple’s fifth stock split and Tesla’s first.
Stock splits were more common in the 80s and 90s, but since then they’ve become less and less frequent.
“Apple and Tesla are the first two companies now announcing a regular stock split since the 90s and this is pretty amazing,” says Markay Latimer, trading expert in stock splits.
According to Markay, if we stay in the bullish market, these stock splits can offer some phenomenal returns. “This is one of the coolest things that could be happening now.”
When a stock split happens, nothing is actually changing in the fundamentals of the company.
The market value doesn’t change.
But the perception changes, because the float is bigger.
Since the individual price of the stock is lower, it becomes more accessible to smaller investors. And this can drive the demand up.
Apple’s nominal price will be cut by four and its float increased four times. Tesla by five.
That means more shares to trade and more excitement about those shares.
It also can help make the stock look more liquid and less overvalued in some cases.
Most experts believe a stock split is a bullish signal because it indicates that the company is confident about its future prospects.
Apple stock has gained around 150% in the last 12 months, and shares are being traded around $500 right now.
This month, the iPhone maker became the first US-listed company to reach a $2USD trillion market capitalization. Two years earlier, it also made history being the first to reach $1 trillion value.
On August 20, Tesla stock price crossed $2,000. It rose an incredible 850% in the last 12 months.
Almost two months ago, it surpassed Toyota and became the most valuable auto manufacturer in the world. Some investors actually believe Tesla is now in the “bubble territory.”
It’s still too early to say if stock splits will become a trend again, or if other companies will follow Apple and Tesla.
Amazon, Alphabet (Google’s parent company), and Chipotle are some of the names that the media have discussed as possible candidates for future stock splits.
Amazon, for instance, is trading for more than $3,200 and hasn’t split its stock since 1999.
It is an incredible money-making opportunity for traders. These markets are highly-active with a lot of excitement, and there is plenty of wealth to go around.
Markay Latimer, the expert we spoke to in this article, is going live to share three of her favorite stocks to trade during all this, as well as give her expert opinion on how to play the Apple stock split. Register for that event here.