Stock split philosophy: why AAPL and TSLA, but not GOOG?

[The Cosmic Avenger]

Not quite a stock picking question, but this forum seems the best fit....basically, do you have any idea when and why the decision is made for stocks to split?

So I bought AAPL in 2012, and it split twice since then, 7:1 and then 4:1, so I've now got 28x as many shares as I had before, and the price is around $129 a share.

I bought GOOG at the same time, and it split into Class A and Class C, but 1:1, so I have twice as many shares as I did before. (I know there's a difference in the stock voting rights, but I'm curious more about the price point influencing the split.) Today they're both around $1,670 a share.

This makes me wonder: why would Google stock not split as much as Apple? I believe fractional shares have been available for a while now, so that shouldn't matter (although I usually did decide to buy round numbers, 10 or 20 or 30 shares at a time). It just struck me as odd that I bought these two at around the same time, and at least closer to the same price, and now they are so different in price and quantity.

 

[njhowie]

Completely psychological.

 

[The Cosmic Avenger]

Completely psychological.

So you think the boards decide to do it for the effect? It just seems so odd to me, now that I think about it, if splits were supposed to be good for your stock price you think we'd see a lot more of them. Maybe if it splits too often it's like a sign of desperation? But why would Google not split?

 

[target2019]

A stock split is a corporate action in which a company increases the number of its outstanding shares by issuing more shares to current shareholders.
The primary motive of a stock split is to make shares seem more affordable to small investors.

https://www.investopedia.com/ask/answers/what-stock-split-why-do-stocks-split

Google directors probably consider this at times is my guess, and don't take action on it.

This article explains the Alphabet split, and other factors. Maybe it is correct?
https://www.fool.com/investing/2017/05/10/alphabet-stock-split-will-the-google-parent-ever-s.aspx

 

[The Cosmic Avenger]

https://www.investopedia.com/ask/answers/what-stock-split-why-do-stocks-split

Google directors probably consider this at times is my guess, and don't take action on it.

This article explains the Alphabet split, and other factors. Maybe it is correct?
https://www.fool.com/investing/2017/05/10/alphabet-stock-split-will-the-google-parent-ever-s.aspx

Hah! Interesting that The Motley Fool piece mentions Berkshire Hathaway, I almost mentioned that as an example of not needing to split, but then IIRC someone said they don't do fractional shares, so that might be an exception, as I think most stocks do.

So it sounds like they're all just guessing? I mean, if AAPL hadn't split the last two times (2014 & 2020), it would be at $3,640. I guess I'm wondering why wouldn't they want to chase BH like Google seems to?

 

[target2019]

https://www.investopedia.com/financial-edge/0712/should-google-pay-a-dividend.aspx

As Sergey and I wrote in the original founders letter 11 years ago, “Google is not a conventional company. We do not intend to become one.” As part of that, we also said that you could expect us to make “smaller bets in areas that might seem very speculative or even strange when compared to our current businesses.” From the start, we’ve always strived to do more, and to do important and meaningful things with the resources we have.

No dividends, no splits. Simple enough.

 

[Montecfo]

There are quite a few stocks that would benefit from a split. Splits became out of favor due to high institutional ownership. It has always been viewed as reflecting management's confidence in the stock.

And most people still buy in round lots.

It does remind me a bit of the fellow who walked into a pizza shop and ordered a large pepperoni pizza.

"Do you want that cut into 6 slices, or 8?", he was asked.

After reflection he replied, "Better make it 6. I don't think I can eat 8"

 

[MRG]

It's interesting the decision. I'm thinking Tesla wanted to increase share count. I read they're selling off another 5B in common at market over ... some time frame I don't remember.

Apple might make sense too. I've read some brokerages do not pass dividends through on fractional shares. I have no idea if this is true, as IIRC the distribution does include fractional shares when it's calculated.

Google and Amazon?

 

[MichaelB]

Completely psychological.

It does remind me a bit of the fellow who walked into a pizza shop and ordered a large pepperoni pizza.

"Do you want that cut into 6 slices, or 8?", he was asked.

After reflection he replied, "Better make it 6. I don't think I can eat 8"

This is the way it is. Ask Nigel Tufnel.

To quote a well known forum member, numbers is hard.

 

[OldShooter]

In Olden Times, buying in "round lots" of 100 shares made sense because of the way stocks were traded and priced. So as stock prices rose, 100x the price got to be kind of a big number and deterred some purchasers, especially small ones. But those days are over. I'm not even sure I've heard the term "round lot" lately. Also (recently) it is now possible for a small investors to buy fractional shares just as they have been able to do with mutual funds for years. So the old constraints are pretty much gone, the only thing remaining is the psychology. And it is kind of a game for some companies. Remember when Buffett was refusing to split and his big stock price actually became a problem for some software that wasn't written to handle enough digits?

IIRC the research pretty much has said that a split is economically a nonevent, but I have not seen anything on the subject lately.

 

[Sunset]

Splits make a difference if a person is doing options.
The lower the stock price, the lower the option price and therefore the more people that can buy/sell options since you have to buy/sell an option in 100 share lots.
(1 option represents 100 shares)

 

[Christine]

I believe fractional shares have been available for a while now, so that shouldn't matter (although I usually did decide to buy round numbers, 10 or 20 or 30 shares at a time).

People outside the US buy shares too. And fractional shares are not available everywhere outside the US.



I know people who have bought Tesla shares this week thanks to the split. Not because they thought it was on sale - but because they could finally afford to buy one share with their monthly salary.


Tesla stated they split “to make stock ownership more accessible to employees and investors,”.

 

[Out-to-Lunch]

This doesn't affect the investor..., but for stocks that are part of the DJIA, a split changes how their future performance affects the Dow. Going forward, Apple has 1/4 of the effect on the Dow than it did before.

(This really points out what a silly system the Dow is, but it still true.)