Feeds

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

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

Next gen security for virtualised datacentres

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. ®

Secure remote control for conventional and virtual desktops

More from The Register

next story
6 Obvious Reasons Why Facebook Will Ban This Article (Thank God)
Clampdown on clickbait ... and El Reg is OK with this
No, thank you. I will not code for the Caliphate
Some assignments, even the Bongster decline must
Kaspersky backpedals on 'done nothing wrong, nothing to fear' blather
Founder (and internet passport fan) now says privacy is precious
TROLL SLAYER Google grabs $1.3 MEEELLION in patent counter-suit
Chocolate Factory hits back at firm for suing customers
Facebook, Google and Instagram 'worse than drugs' says Miley Cyrus
Italian boffins agree with popette's theory that haters are the real wrecking balls
Mozilla's 'Tiles' ads debut in new Firefox nightlies
You can try turning them off and on again
Sit tight, fanbois. Apple's '$400' wearable release slips into early 2015
Sources: time to put in plenty of clock-watching for' iWatch
Facebook to let stalkers unearth buried posts with mobe search
Prepare to HAUNT your pal's back catalogue
prev story

Whitepapers

Endpoint data privacy in the cloud is easier than you think
Innovations in encryption and storage resolve issues of data privacy and key requirements for companies to look for in a solution.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Advanced data protection for your virtualized environments
Find a natural fit for optimizing protection for the often resource-constrained data protection process found in virtual environments.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.