Apple announced on Thursday that it would split its stock at a ratio of 1:4 to expand its investor base. Under the plan, investors who own one apple stock will receive an additional three shares. In the past, when the stock price exceeded about $100, most companies almost chose to split shares. But since the dotcom bubble burst in 2000, there has been less and less equity split in S & P 500. Dow Jones Industrial Average constituent stock split case is even more rare. Apple is a component of both stock indexes. < p > < p > a large investor in Apple shares applauded Apple’s move and predicted that Apple’s share price would continue to rise based on its 31% gain so far this year. “This split helped to lay the foundation for apple to have a strong calendar year closing performance.” Daniel Morgan, senior portfolio manager at synovus trust, an investment trust. The news of < / P > < p > seems to be very popular in the market. Apple shares rose nearly 6% in after hours trading. In addition, Apple’s beautiful financial report also boosted the share price. This is Apple’s fifth stock split. Since its listing in 1980, Apple has carried out 1:2 stock split on June 16, 1987, June 21, 2000 and February 28, 2005. On June 9, 2014, apple took another 1:7 split. < / P > < p > Apple said that for all Apple shareholders whose shares were registered as of August 24, 2020, they would receive an additional three shares for each share they held on the registration date, and the stock trading after split adjustment would begin on August 31, 2020. < / P > < p > splits can help attract investors, who may be blocked by high stock prices. But Apple’s split may not be as important as last time. Jiaxin financial management and other securities companies have launched a piecemeal investment function for their customers. They can buy expensive stocks of large companies for only $5, which greatly reduces the admission cost of retail investors. Apple shares traded at more than $400 in after hours trading on Thursday. With a 1:4 split, Apple’s share price will drop to about $100. < / P > < p > except for the lower share price, it has little effect. Stock splits do not fundamentally change a company or its valuation, although historical experience shows that it can boost the stock price in the short term. Apple is the most valuable company in the United States, followed by Microsoft and Amazon. In recent years, stock split has become a rare phenomenon on Wall Street. According to data from S & P Dow Jones, only three S & P 500 companies announced stock splits in 2020, lower than the average of 10 companies per year in the past decade. < / P > < p > in most cases, the split has no effect on the overall stock market, especially the market value weighted S & P 500 index. But the Dow Jones industrial average is another story. It’s a price weighted average. Apple’s current weight in the Dow Jones industrial index is about 10%, a 1:4 split will lead to a decline in its share price, which will become a quarter of its original weight, ranking 18th in the Dow Jones industrial index. So, the future growth of Apple’s share price will have a negative impact on the Dow Jones industrial index. < p > < p > Apple was included in the Dow Jones industrial average in 2015, and its share price has risen 230% since then. The Dow Jones industrial average is a price weighted average, which means that the higher the share price, the more points it contributes to the daily movement of the Dow Jones industrial average. Now, Apple’s share price is higher than the other 29 stocks in the Dow Jones industrial average, with the biggest impact. After the split, its weight was in the middle reaches, pushing United Health Group (US $305.23 per share) to the position of the largest heavyweight. Moreover, Apple’s split may widen the performance gap between the Dow Jones industrial index and the S & P 500 index, as the technology industry with soaring stock prices will lose weight in the Dow Jones industrial index. The S & P 500 has grown 0.5% this year, outperforming the Dow Jones Industrial Average’s 7.8% decline, the biggest gap in decades. < / P > < p > Apple’s split later this summer will be the company’s fifth, highlighting Apple’s continued focus on attracting retail investors. Apple is also bucking the trend. Over the years, share prices of other tech giants have soared to hundreds, even thousands of dollars a share. < p > < p > take Amazon as an example. The company has not split shares for more than 20 years, resulting in its share price climbing to $3051.88 per share. Google’s parent company alphabet’s A-share and c-share shares were trading at up to $1538.37 a share. What’s more, Berkshire Hathaway, which is owned by Warren Buffett, has a class a share price of $291362. Berkshire’s class B stock, created in 1996 to attract more retail investors, is priced at $194.30 and is included in the S & P 500 index. Berkshire spun off class B shares in 2010. As of Thursday’s close, Apple’s share price was 28th in the S & P 500 index. The most expensive stock in the index is home builder NVR, which shares close to $4000. (author / Xiao Yu)

By ibmwl