Apple’s much-anticipated 7-for-1 stock split officially went into effect with its new pricing on Monday morning, trading at $92.69. Apple’s all-time high stock price, reached in September 2012, is $705 or $100.72 post-split.
“We’re taking this action to make Apple stock more accessible to a larger number of investors,” Apple CEO Tim Cook said in April.
What is a stock split? It’s when a company issues a certain number of shares for each one already in circulation, causing the new shares to be worth a fraction of what they were worth previously. Splits typically are 2-for-1 or 3-for-1.
In a 2-for-1 split, the stock’s new per-share price would be half of what it was previously and the company would have twice as many shares in circulation. Apple executed a 7-for-1 split, so the per-share price of its stock is now one-seventh the previous price, explains San Jose Mercury News.
After Apple went public in 1980 for $22 per share, it has executed three separate 2-for-1 stock splits, in 1987, 2000 and 2005. Since then due to rumors about new iDevides like iWatch, larger version of iPhone Apple’s stock has climbed by more than 20%. Accounting for its four stock splits, Apple’s stock cost roughly $0.39286 per share at IPO, giving a return of roughly 23,400% over 33.5 years.
Even though the overall stock market has been soaring, only 57 splits have been completed since 2009 among companies in the Standard Poor’s 500. That compares with 375 splits from 1997 through 2000, a period that coincided with the dot-com boom, says ABC News.
Apple has said it opted to split its stock in an effort to make it more accessible to a larger number of investors. Those who received additional shares will not see any personal income tax consequences as a result of the split. The tax bases of each share owned after is one-seventh the amount it was before the split.
Actually, being one of the most valuable publicly traded company in the world, with a market cap of more than $550 billion, Apple could be a logical addition for the index. It would join a number of other high-tech companies listed including Cisco, IBM, Intel, Microsoft, AT&T and Verizon.
According to some investors, the stock split might attract more individual investors, who they would afford to buy additional shares. However, the stock has opened relatively flat Monday.
Investors are already rushing into say the stock can go higher. UBS Monday said that the company’s future products, which it speculates to be a iPhone 6 and iWatch will make the company’s 2015 fiscal earnings 5% higher than it previously forecast. UBS has a price target of $100 on the stock, reports USA Today.
Although it’s unclear if this was Apple’s intent, the lower price could clear the way for the company to be included among the 30 stocks in the Dow Jones industrial average. The closely watched benchmark is supposed to mirror key sectors of the economy, a role that seems perfectly suited for Apple given the popularity of the company’s products and its $171 billion in annual revenue.