On Thursday, Apple announced that its Board of Directors had approved a four-for-one stock split.
Stock splits cater to smaller investors by making the shares more affordable and accessible. For instance, Apple is currently trading at $425.04, and with a stock split, investors would be able to buy a share at just over $106.00.
Stock splits don’t change the foundation of interest as they don’t influence share prices. Investors who currently have an interest in Apple stock will receive three more shares once the market closes on August 24.
In the past, stock splits have sometimes been controversial as shares sometimes surge on the news.
Many companies had stock splits during the tech bubble, and speculation drove shares higher. But earnings growth failed to back up the share prices. Investors today feel that overall tech shares are running ahead of their fundamentals.
Warren Buffett, who has never split the price of Berkshire Hathaway’s main A shares, said in 1994, “I think most people think that the stock would sell for more split money. We wouldn’t necessarily think that was advisable in the first place. In the second place, we don’t think it would necessarily be true over a period of time. We think our stock is more likely to be rationally priced over time following the present policies than if we were to split it in some major way. And we don’t think the average price would necessarily be higher. We think that the volatility would probably be somewhat greater, and we see no way that volatility helps our shareholders as a group.”
Having noted Buffett’s position on his company’s A shares, the investment tycoon has done stock splits on its Berkshire B shares in the past.
It’s most recent stock split was in 2014, which prompted its 2015 addition to the Dow Jones Industrial Average.
The Dow is price-weighted, and Apple is the highest-priced stock at this time in the index.
In its press release, Apple said it hopes to make “the stock more accessible to a broader base of investors.”