Correct. In theory it doesn't make much of a difference (ie, 20 nickels vs 4 quarters). Investors generally perceive it to be management having a bullish outlook on stock price. And there is a small liquidity benefit (although AAPL already pretty liquid).
Options markets are where this has the most impact. In order to sell a covered call, I need to own at least 100 shares of a stock. A stock priced at $500 or higher (in the case of GOOG) makes it harder for a smaller investor to participate in the options market. Splitting the stock price makes it possible for a little guy to purchase options based on their stock holdings.
Have you traded the minis? I just looked after reading MichaelApproved's comment and the quotes I saw for the minis were way outside the standard contracts.
Well they're not usually "way outside" but yes, they are usually more expensive. Also, most brokers add a per-contract fee so that also adds to your cost basis.
If you're looking right now, it's possibly because AH trading is much more volatile.
Day 0: Company trading for $1/share with 100 outstanding shares -- Market cap = $100. They are offering $0.05/share dividends -- Total dividend = $5
Day 1: Stock split at 5:1
Day 2: Company trading for $0.20/share with 500 outstanding shares -- Market cap = $100. They are offering $0.01/share dividends -- Total dividend = $5
Yes. Basically, a stock split changes nothing about the value of the stock. However, it might lead to a slight rise in the stock price since small investors will now find it easier to buy, and so total demand for the stock might be a bit higher.
This article has a little more information, stating that this quarter's dividend will be exactly $3.29 per share of common stock for all shareholders as of 5/12/2014.
The narcissist in me thinks it will go down further than 1/7th the previous price, because whenever I hear about Apple stock, it's going down. Apple sold 5 million iPhones, stock goes down; Apple announces new product, stock goes down; etc...
A split has absolutely zero impact on the worth of your shares. The primary reason companies do it is to attract investors who are more comfortable paying lower prices for the shares, thus increasing demand and driving a higher price.
Nothing changes except the number of shares you own. The total amount of money you have in AAPL will remain the same. Your dividend check will remain the same (assuming an equal percentage the next time a dividend is announced). You'll own more shares, but each individual share will be worth less (but again, the total worth of your AAPL stake will remain the same).
Will it go up or down? (EDIT: apparently "up" if afterhours is any indication.) Used to be, back in the dotBomb days, a split announcement drove the price up. Now remember from above that nothing has really changed. AAPL's market cap is still the same, there's just more shares out there. One thing that has changed is that Joe Sixpack doesn't need to drop $50K to buy a lot of 100 shares. But Joe doesn't drive the market, institutional investors do. And when Fidelity's mutual fund is buying $10,000,000 worth of AAPL, they don't care if the share price is $1 or $1000. So there isn't much rational reason for the price to go one way or another.
A split could be taken as "management thinks...". I don't know, could have some weight to it, could not. At the end of the day, as someone who has traded stocks for over 15 years and traded AAPL since about 2003 (yea, me! Mostly...), I'm not making any decisions one way or the other on this news. I'll keep an eye on AAPL for sure, though, just in case the market disagrees with me.
Would now be a good time to buy? No, yesterday was a good time to buy (that's okay, I didn't either) because it's up 8% in afterhours. Earnings are tomorrow, and never ever never buy AAPL the day before earnings (it almost always go down the next day). WWDC is coming up, so it could be "AAPL announcement means they'll soon own the $WHATEVER market. Buy!" or it could be "AAPL announcement shows that a post-Jobs Apple is doomed. Doomed!"
No offense, but if you have to have a stock split explained to you then you're probably not suited to trying to time the market on AAPL. Hell, I've been trading AAPL for over ten years, and I'm not suited to trying to time it (I've done it, and mostly come out ahead, but I attribute it to getting lucky and not to my 133t trading skillz). Just hang on to it, see how it shakes out, and if it hits a good price for you at some point, sell it. Or if it takes a dip (say, after earnings maybe?), buy some more. If it opens up 8% tomorrow morning, you might even consider selling what you've got. Then if it dips after earnings, buy some more then.
But I am in no way, shape, or form a financial adviser. My advice isn't even worth what you paid for it. For entertainment purposes only, do not under any circumstances make trades based on what some anonymous dumbass on the internet says, because we're a dime a dozen, and if I were so smart I'd be hiking the Cascades today and not working a day job.
> Would now be a good time to buy? No, yesterday was a good time to buy (that's okay, I didn't either) because it's up 8% in afterhours. Earnings are tomorrow, and never ever never buy AAPL the day before earnings (it almost always go down the next day). WWDC is coming up, so it could be "AAPL announcement means they'll soon own the $WHATEVER market. Buy!" or it could be "AAPL announcement shows that a post-Jobs Apple is doomed. Doomed!"
That's wrong. This announcement came as part of the earnings announcement - it is already out and they did have a great quarter (hence the 8% pop).
To another point, I would expect a slight appreciation from the stock split. Apple is one of the most traded retail stocks and affordability could certainly provide a bump to the stock.
Then you're already ahead of most individual investors in the market. Hubris will lose you more money than anything else. Ask me how I know. :-) (Wishful thinking comes a close second to hubris, though.)
If I currently have 10 Apple shares, what will happen after the split?
Is the value of each share expected to go up or down as a result of this?
Would now be a good time to buy? ( or, at least, better than last week before this was announced?)