Three things you need to know about Apple’s stock split

Date | 31-08-2020 - 08:45 AM Article Type | Stock Markets Region | World

The fifth split in the company’s history led to changes for the Dow Jones Industrial Average that will also take place before trading begins Monday

Apple Inc.’s stock price will appear quite a bit lower Monday morning, but investors shouldn’t fret.

The iPhone and Mac giant’s four-for-one stock split officially took place after the close of trading Friday, and Apple AAPL, -0.16% anticipates that the move will make its shares “more accessible to a broader base of investors.” As a result of the split, Apple shareholders will own four shares for every one they held prior.

It’s a notable day as well for Tesla Inc. TSLA, -1.13%, which is conducting a five-for-one split after Friday’s closing bell and will see its stock also begin trading on this new basis Monday morning.

Here are three things to know about Apple’s stock split.

How it works
After Friday’s closing bell, Apple shareholders are due three extra shares for each existing share of the company that they own. This is applicable for those who were shareholders of record by Aug. 24. Apple shares officially start trading at the new split-adjusted price at the opening bell of Monday’s Nasdaq session. Apple announced its plan for the split on July 30 with its most recent earnings report.

Expect Apple’s stock price to be about 75% lower when trading begins Monday morning as a result of the split — shares closed Friday at $499.23, suggesting that they will open around $124.81, though the tenor of premarket trading could affect that. While some systems may appear to register that Apple’s stock has actually declined by 75%, the historical records will eventually be adjusted so that Apple’s past stock prices are also reflected on a split-adjusted basis.

Historical precedent
This marks Apple’s fifth stock split in its time as a public company. It went public in December 1980. Apple conducted a seven-for-one split on June 9, 2014, and two-for-one splits on June 16, 1987, June 21, 2000, and Feb. 28, 2005. Had Apple never split its stock, shares would currently be changing hands for roughly $28,000 apiece.

With the historical adjustments, previous events and prices will be changed. For instance, Apple priced shares in its 1980 initial public offering at $22 a shares. After its first four stock splits, though, that price fell to 39 cents a shares in the historical register, and it will fall again — to about a dime — after this split.

Shaking up the Dow
Accessibility aside, Apple’s stock split also helps bring its stock price more in line with peers in the Dow Jones Industrial Average DJIA, +0.56%, which is weighted by price. Trading just shy of $500 before the split, Apple was the biggest component in the blue-chip index, but it will fall to the middle of the pack after the split as UnitedHealth Group Inc. UNH, +0.86% reclaims the top spot, which it occupied for part of the spring. Apple will have the 18th largest weight among the 30 index members based on Friday’s closing price, according to Dow Jones Market Data.

Just seven Dow Jones Industrial Average components, including Apple, had share prices higher than $200 prior to the split.

Author: PPS
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