The June 5, 2019 Apple stock split made by Apple is a move from the stock price to an underlying value. There were a multitude of reasons as to why Apple called this split. Apple had approximately 172 million shares of its outstanding common stock at the end of the most recent quarter. The share price had already dropped to $159 per share. Some people felt that a stock split made no sense and that is what they are being told by the news outlets that deal with Apple stock. That is not the case at all. Here are three things that Apple stock investors need to know.
Why a Stock Split
The stock price was the reason for the stock split. There was a lot of speculation that the stock price needed to go up to get it to the level that Apple’s stock price had been before. Apple gave investors another reason why they split the stock that there were still enough shares of the company to make it happen. Apple increased its earnings per share by nearly $2 per share. They were able to increase their earnings per share because their operating margin was at 22%. When they divide that with the common stock they ended up with their total stock shares at 172 million shares, giving them 21 million more shares per share. That was also enough shares to make the stock split happen. The difference is that the stock was not split by dollar amount. If it was, it would have not went up in value. Instead, Apple increased their stock price to allow investors to take advantage of the difference.
No Reverse Stock Split
If you know anything about splits there are two kinds of them that occur. A stock split is not a reverse stock split. Apple stock investors had to expect that to happen. The reasons are because those companies that split the stock were not very successful in the first place. However, that is why they call the stock split as “split.” It could have been call an “accident stock split.”
Why did Apple do a reverse stock split?
The reverse stock split was something that Apple shareholders would like to see. They had the option of an increase in stock price which would give the stock more appeal to the common stock market investors that buy and sell the stock. It was thought to be the way to do it. Apple knew it was not going to be able to double the stock price and have it be the price. The only reason they call a stock split as “split” is because Apple has the option of a reverse stock split.
History of Reverse Stock Splits
There is a history of reverse stock splits by Apple and there are some reasoning for why. Apple stock splits 12-to-1, five-to-one, 10-to-one, and 12-to-one. Apple has done so many stocks splits over the past decade or so. If you ask the people that have invested in Apple stock, the majority of them are not against the reverse stock split. Some stock investors have hated the reverse stock split that Apple has had. Apple is not a large company and they can do what they want to do. If the stock price of Apple stock declined as far as was supposed to happen, there is always a possibility of Apple stock going back to their historical share price. Some people do not want to hold onto stock that did not perform well for them. Apple’s stock prices more times than not have gone down during the year and that means it might not last.
Now that Apple has split their stock we know what to look forward to in the future. This is not the last stock split we will see from Apple. It is just the first one that happened. Apple has a history of doing stock splits and I can see it continuing. The benefits of this stock split were a bit under-known but my readers already knew there was more than one reason for the stock split. Some people went so far as to say that Apple might have saved $50 million from this stock split. We will know for sure what happened in the next few days.