Feeds

Apple stuns world with rare SEVEN-way split: What does that mean?

The price of a single share will drop by almost 86%

Top 5 reasons to deploy VMware with Tegile

Apple surprised Wall Street on Wednesday by announcing the most aggressive stock split in its history – and just a month after Google executed its first-ever split.

The iPhone maker's seven-for-one split, due to take place on June 6, will see the fruity firm issue six new shares of common stock for each share currently in existence.

This will be the fourth stock split since Apple incorporated in 1980, and the most unusual. The previous splits – in 1987, 2000, and 2005, respectively – were all of the more typical two-for-one variety.

Stock splits don't change the value of investors' holdings. What they do, however, is adjust the price of an individual share of the stock – in this case, dramatically.

Once the split takes effect, the price of each Apple share will be divided by seven. So if a single share of Cupertinian stock was trading for $525 on June 5 (as it was as of the closing bell on Wednesday), the following day it would trade for $75, along with six new, identical siblings.

To put that into perspective, Apple currently has a market capitalization of around $468bn. That means that at its current trading price, one share of fruity stock is worth about one 891-millionth of Apple's business. Post-split, the value of one share goes down to one 6.2-billionth.

During an earnings call with investors, CEO Tim Cook said the reasoning behind the move was "to make Apple stock more accessible to a larger number of investors."

That sounds sensible enough. And yet some prevailing wisdom – most famously the opinion of billionaire Berkshire Hathaway kingpin Warren Buffett – suggests that stock splits can hurt companies, because a lower share price invites short-term investors who trade shares more frequently, increasing their volatility.

One company that shares Buffett's opinion is Apple's archrival, Google. In 2008, the advertising giant's then-CEO Eric Schmidt told CNBC that he liked to keep the stock price high and there were no plans for a split.

At the time, Google shares were trading for around $235. By the time its stock actually did split earlier this month, a single share was worth almost $1,200. And Google only split its shares two-for-one, leaving them plenty pricey.

Whatever Cupertino's motive for slashing its share price, however, there was some additional, immediate good news for shareholders during Wednesday's earnings report. The fruity firm announced that it would pay a dividend of $3.29 per common share on May 15 (before the stock split), an increase of 8 per cent.

In addition, Apple said it is upping the amount it will spend on share repurchases from $60bn to $90bn – a move that's sure to please so-called activist investor Carl Icahn, who has been pestering Cook to be even more aggressive with the buybacks.

As for the split, although current investors will be issued their new shares on Friday, June 6, Apple's stock won't officially begin trading at its new, lower price until the following Monday, June 9. ®

Beginner's guide to SSL certificates

More from The Register

next story
The 'fun-nification' of computer education – good idea?
Compulsory code schools, luvvies love it, but what about Maths and Physics?
Facebook, Apple: LADIES! Why not FREEZE your EGGS? It's on the company!
No biological clockwatching when you work in Silicon Valley
Lords take revenge on REVENGE PORN publishers
Jilted Johns and Jennies with busy fingers face two years inside
Happiness economics is bollocks. Oh, UK.gov just adopted it? Er ...
Opportunity doesn't knock; it costs us instead
Ex-US Navy fighter pilot MIT prof: Drones beat humans - I should know
'Missy' Cummings on UAVs, smartcars and dying from boredom
Yes, yes, Steve Jobs. Look what I'VE done for you lately – Tim Cook
New iPhone biz baron points to Apple's (his) greatest successes
Sysadmin with EBOLA? Gartner's issued advice to debug your biz
Start hoarding cleaning supplies, analyst firm says, and assume your team will scatter
Edward who? GCHQ boss dodges Snowden topic during last speech
UK spies would rather 'walk' than do 'mass surveillance'
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Why and how to choose the right cloud vendor
The benefits of cloud-based storage in your processes. Eliminate onsite, disk-based backup and archiving in favor of cloud-based data protection.
Three 1TB solid state scorchers up for grabs
Big SSDs can be expensive but think big and think free because you could be the lucky winner of one of three 1TB Samsung SSD 840 EVO drives that we’re giving away worth over £300 apiece.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Security for virtualized datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.