November 18, 2011 | In: Opinion
Will Apple Stock Split?
I have correctly predicted that IRE will reverse split three months before it did (by the way, I think that for IRE another reverse split will happen or even a complete delisting from the stock market – at least the US market), so this time I will discuss AAPL, to see whether it’ll split or not.
As I’ve already pointed out before, a split is most likely to happen when the stock becomes very expensive, which is the case of Apple. It is currently one of the top 10 most expensive stocks (Note: This list is now a bit outdated, but you can have a clear idea where AAPL stands).
So, technically, AAPL is splittable, at least 10:1 (10 stocks in the new system will be equivalent to 1 stock in the old system), and for the past year or so, there were many rumors claiming an imminent split for the Apple stock.
But let’s look at the split from the eyes of Apple’s executives:
- They know that the current bullish trend is not sustainable, especially with all the competition jumping in to clone their pads and their smart phones (which are not that smart anymore when compared to the latest Android models).
AAPL, as a stock, has already a huge daily volume (about 19 million shares traded every day), so, splitting the stock just to allow smaller investors to buy Apple stocks is not a valid point.
It is a prestige for AAPL to remain in the top 10 most expensive stocks. By splitting the stock, Apple will lose the prestige and it may take a while (a long while) to regain it (if it’s ever to regain it).
Splitting the stock will create extra administrative work on Apple as a company (especially its finance/accounting divisions), and will confuse investors for some time.
It is not the time to split stocks, especially in this very, very volatile market (Apple has crossed the $400 price barrier several times before, and then it retreated below that number).
GOOG did not split (and Google doesn’t seem to have any plan to split it in the foreseeable future), so why should AAPL split?
As you can see from the above, and from Apple’s executives perspective, there are no benefits whatsoever from splitting the stock. In fact, splitting now may cause more harm than good.
So, as a conclusion, Apple will not split, at least not in the next few years. It just doesn’t have to and it doesn’t want to!
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