Reading more, beyond the bottom line... As Jim Cramer illustrates so often, when you take a pencil and break it in half...
Regular Stock Split: This is an event that increases the number of outstanding shares by a factor of X, but then divides the share price by that same factor. For example, a 2-for-1 stock split will double the number of shares in a company, but will simultaneously divide the price of each share, (reduces its share price) by that same factor of 2, to compensate. Thus, if a stock is $20 a share, and you own 100 shares before the split, you will then have 200 shares at $10 a share, after the the 2-for-1 stock split.
Reverse Stock Split: The exact opposite occurs with a reverse stock split and it is usually a higher numbered ratio to help very low-priced stocks achieve higher pricing. An example would be a 1-for-20 reverse stock split, where you might own 20,000 shares of a stock currently priced at $1 a share. After the 1:20 reverse split, you would then own just 1,000 shares, but they would each now be valued at $20. Preventing De-Listing: This is the scenario when a stock is threatened by the NYSE for example, to be de-listed because its share price is too low.
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Stock Splits have been studied by business psychologists and widely discussed by network commentators. They actually do nothing to change the total market capitalization of a company (at that point in time). However, it is the anticipation of an announced planned stock split, and the psychological effect afterward of a perceived "lower" price point per share of stock, that can work in the stock's favor to encourage further buying of the stock, causing it to really increase in value as its price goes up. Actual examples of regular and reverse stock splits include:
AIG Group (AIG): July 2000: 3-for-2 Stock Split
AIG Group (AIG): July 2009: 1-for-20 Reverse Split (after its share price had dropped to just $0.66 cents a share; the reverse split priced each share at $13.14)
Apple, Inc. (AAPL): Feb 2005: 2-for-1 Stock Split (Split doubled its outstanding shares, but took share price from $76.90 to $38.45)
Microsoft (MSFT): Feb 2003: 2-for-1 Stock Split (Split doubled its outstanding shares, but took share price from $47.40 to $23.70)
It should be noted that, since 2005, there has been a trend toward a reduced frequency stock splits. Some companies, Google and Berkshire Hathaway for example, have publicly stated that they will not be utilizing stock splits for their companies.
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13 Stock Splits since Intel's IPO: Although there have been 13 stock splits since Intel went public in 1971 (i.e., 10/13/71 at $23.50/share), there have only been six (6) stock splits since 1986.
Types of Stock Splits by Intel: Of the six (6) stock splits since 1986, five have been 2-for-1 splits, with the oldest, in October, 1987, being a 3-for-2 split.
In what months did the 13 splits occur: Can knowing this help you predict possible timing for future splits? Unlikely but, if you see a definite trend, it's worth noting. Intel's 13 stock splits have broken out as follows, by quarter:
1Q Splits: 0 splits occurred (0% of total)
2Q Splits: 8 splits occurred (62% of total)
3Q Splits: 3 splits occurred (23% of total)
4Q Splits: 2 splits occurred (15% of total)
Using the workbook: Use your workbook, under Step 270 notes, to track your own company's stock split history and breakout by quarter.
[link to this information - here >]
Conclusion from our findings: The last stock split which occurred for Intel was July 31, 2000 (a 2-for-1 split). Given that it has been almost 10 years, Intel may also be adopting a policy away from stock splits. To try to check this further, we went to Google, and entered: "stock split"+Intel and found a link to a statement on the Intel website itself, which stated:
Therefore, we don't see a policy stating they are against stock splits. They have left the possibility (and management flexibility) open for future stock splits. Also, checking Intel's track record for stock splits above, it may be smart to assume that most splits would occur in the 2nd or 3rd quarters, with few likely in the 1st quarter of a given year. [link to this information - here >]
The next step, Secondary Offerings, is extremely important to understand given that they can severely dilute the value of each share of stock outstanding, and hurt a stock's growth potential, depending on how Wall Street investors interpret their strategic value to the company...
More about this in Step 275...
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