Apple Announces 4-for-1 Stock Split

Alongside announcing its terrific third-quarter results, Apple (AAPL) also announced a 4-for-1 stock split, making its common shares significantly cheaper. This move doesn’t suggest that Apple is tanking, as its just reported quarter results show that the company is far from a loss.

Apple’s board of directors approved the stock split move which will take effect from August 31. All Apple investors of record as August 24 will be given three additional shares for every share held on that date.

Usually, publicly traded companies tend to make such moves when their stock has become relatively expensive on a per-share basis. A lower stock price tends to attract more low budget investors. At market close on Thursday, Apple’s stock was trading at $384.76 per share, and later gained 5.8% pushing shares higher than $400.

Although Apple is yet to disclose the specific reason for the stock split, it gave a hint, saying that it wanted to make its stock “more accessible to a broader base of investors.”

Apple beat expectations on recent earnings release.

Apple beat expectations with its fiscal third-quarter results reading higher than Wall Street’s expectations. The company benefitted from its smartphones sales following the launch of the iPhone SE in April, as well as the distribution of stimulus payments, and relaxation of shelter-in-place restrictions, all of which drove better performance in May and June.

“We’ve been having a strong cycle with the iPhone 11 and 11 Pro, and so when you combine a strong cycle plus an iPhone SE launch plus the reopening of the stores etcetera, I think there were a lot of things that were going in the right direction there,” said Chief Executive Tim Cook on earnings call with investors.

Stock splits are common in the market and they do not change the inherent value of a stock. The company’s total market capitalization also remains the same, it only spreads among a number of higher shares.

This would not be the first time Apple is putting out stock splits. The tech giant has enacted 2-for-1 splits three times, in June 1987, June 2000, and February 2005. The company also put up a 7-for-1 split in June 2014, which was the last until now.