Ignore Stock Splits, Even Those of Apple and Tesla
Investors are no better or worse off when a company splits its shares.
Splitsville.
Photographer: Anthony Kwan (Apple); Stefan Wermuth (Tesla)/Bloomberg
Stock splits may be the least interesting and controversial subject in all of investing. But they shot to fame last week when Apple Inc. and Tesla Inc. split their shares, just when millions of Americans are buying stocks for the first time on Robinhood and other trading apps. So it’s worth unpacking stock splits for those who are encountering them for the first time.
Here’s the gist: Publicly traded companies occasionally increase the number of their shares in circulation. Let’s say a company wants to double its number of shares. It would announce a 2-for-1 stock split in which every share held receives an additional share. The price of the stock would be cut in half, so that the total market value of the company and the value of each shareholder’s investment are unchanged.