Have you taken a Bite out of Apple?

On July 30, 2020 Apple  (NASDAQ:AAPL) announced they will be splitting their stock 4-1. After a blow out third quarter the tech giant felt it was necessary to make some changes with their stock price. Apple has grown to be the most valuable company in the world with a market capitalization of over two trillion dollars. That’s crazy!!!

 The board of directors approved the stock split decision, which will take effect on August 31, 2020.

 Stocks typically will do a stock split when the share price has increased to a point where it is difficult for the average investor to purchase. Companies may also split their stock to raise capital for additional business expenditures. Apple stock was trading at $384.76 per share at the close of the market of August 31, 2020.

This is not the first time Apple has split their stock. This will be it’s fifth time. The fact that Apple is splitting it’s stock can be an amazing opportunity for retail investors (people like me and you) Keep reading and I will explain later.

 It is very important to note that stock splits DO NOT change the value of the stock, it simply just divides the share price into more pieces.

So What is a stock split and how does it effect my Portfolio?

Ok so let’s say you own 1 apple share at a share price of $500 USD on or before Aug 24, 2020.  When the split occurs which is called the Split date which is Aug 28, 2020 you are entitled to receive 4 shares at a price of $125.00 which is simply your one Apple share of $500 divided into 4.

As you can see there is no increase in its intrinsic value however it does make the stock more accessible to purchase for people who do not have a lot of money. So instead of spending $500 for one share the new price is $125 for one share.

The investors who already owned the shares in their portfolio would essentially have four times the amount of shares but the value of their shares would remain the same

Look at it like this - Your $1.00 is now four quarters. The value is still the same.

I personally think this is an amazing opportunity as it gives shareholders the opportunity to buy Apple at a cheaper cost. If you are bullish on Apple (refer to Money Lingo) it gives you the opportunity to load up on Apple over the long term.

 Apple’s stock has split four times since the company went public. The stock split on a 7-for-1 basis on June 9, 2014 and split on a 2-for-1 basis on February 28, 2005, June 21, 2000, and June 16, 1987.

I think this is very important to note. Holding Apple stock over the long haul may bode well for investors as you can put yourself in a position where your stock can grow exponentially and eventually experience multiple stock splits which can have massive financial repercussions.

Click the link below to watch Brian from Apple Explained discuss the split


Article By

Peter Simons

Wealth Management Advisor and Insurance Broker
Peter Simons is the CEO and managing director at CPN Financial Services Ltd and an active member of the Ontario College of Teachers.

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