Stock Split

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    Posted: 14 September 2010 01:52 PM

    ... I know, I know. BELIEVE ME, I know.

    Nevertheless, I did think this gentleman had a good point relative to low volume markets and “blimps ready to pop”

    http://blogs.forbes.com/greatspeculations/2010/09/13/apple-revs-up-for-the-run-past-300/


    “If I could write I note to Steve Jobs, I would tell him to split his stock three to four for one and it would be above 300-320 in a New York minute!  This would add demand for the stock as individuals who don?t buy stocks over $100 will be interested and brokers will feel comfortable buying it in this new low volume market.  It would be a huge catalyst to get more market participants into this stock and take up supply.  Take BIDU for example, with a ten for one split a few months back it?s really at $860 and no one talks about it like a blimp ready to pop.”

         
  • Posted: 14 September 2010 02:00 PM #1

    If I recall correctly, a 3 or 4 for 1 share split would require authorization of new shares based on the nearly 1 billion shares currently outstanding.

         
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    Posted: 14 September 2010 02:17 PM #2

    DawnTreader - 14 September 2010 05:00 PM

    If I recall correctly, a 3 or 4 for 1 share split would require authorization of new shares based on the nearly 1 billion shares currently outstanding.

    Dawn, I am sure you are right. The folks on this board know so much more than me about APPL that it’s downright embarrassing!

    Nevertheless, it was the first argument I’ve seen for some kind of split in APPL that didn’t make me go, “pffft.”

         
  • Posted: 14 September 2010 02:40 PM #3

    xian - 14 September 2010 05:17 PM
    DawnTreader - 14 September 2010 05:00 PM

    If I recall correctly, a 3 or 4 for 1 share split would require authorization of new shares based on the nearly 1 billion shares currently outstanding.

    Dawn, I am sure you are right. The folks on this board know so much more than me about APPL that it’s downright embarrassing!

    Nevertheless, it was the first argument I’ve seen for some kind of split in APPL that didn’t make me go, “pffft.”

    I’m not opposed to a split. I just see it as not having anything more than momentary impact on the share price following the news since it does not change the underlying value of the company.

         
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    Posted: 14 September 2010 02:40 PM #4

    xian - 14 September 2010 05:17 PM
    DawnTreader - 14 September 2010 05:00 PM

    If I recall correctly, a 3 or 4 for 1 share split would require authorization of new shares based on the nearly 1 billion shares currently outstanding.

    Dawn, I am sure you are right. The folks on this board know so much more than me about APPL that it’s downright embarrassing!

    Nevertheless, it was the first argument I’ve seen for some kind of split in APPL that didn’t make me go, “pffft.”

    Apple is on record stating that they wouldn’t be interested in a split unless Apple broached $400 a share. My conjecture is Apple’s thesis is that the high cost of entry stabilizes Apple’s market cap and share price. The underlying thesis is that nobody likes to see the value of their portfolio whipsawed?not investors and not Apple employees.

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    Posted: 14 September 2010 03:18 PM #5

    Eric Landstrom - 14 September 2010 05:40 PM
    xian - 14 September 2010 05:17 PM
    DawnTreader - 14 September 2010 05:00 PM

    If I recall correctly, a 3 or 4 for 1 share split would require authorization of new shares based on the nearly 1 billion shares currently outstanding.

    Dawn, I am sure you are right. The folks on this board know so much more than me about APPL that it’s downright embarrassing!

    Nevertheless, it was the first argument I’ve seen for some kind of split in APPL that didn’t make me go, “pffft.”

    Apple is on record stating that they wouldn’t be interested in a split unless Apple broached $400 a share. My conjecture is Apple’s thesis is that the high cost of entry stabilizes Apple’s market cap and share price. The underlying thesis is that nobody likes to see the value of their portfolio whipsawed?not investors and not Apple employees.

    Eric, just kind of disagree with you on this one. APPL has been anything but “stable” these past few years (granted the market has been through the ringer), but “wipsawed” is exactly what we’ve gotten? perfect adjective, in fact. It’s what we get every time big traders start to engage in what I believe is called by some as, “the sling shot trade”

    I’m not advocating a split (though I’m sure it sounds that way), I just don’t see current levels as having prevented us all from being wipsawed, anyhow.

    I was unaware of management’s comment regarding split at $400. Thanks for the info!

         
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    Posted: 14 September 2010 04:09 PM #6

    I had a question regarding Stock Splits and Options.

    If I had 2012 Leaps in AAPL and the stock split 2:1, would the leaps also be adjusted, or would the become effectively worthless?

         
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    Posted: 14 September 2010 04:22 PM #7

    CdnPhoto - 14 September 2010 07:09 PM

    I had a question regarding Stock Splits and Options.

    If I had 2012 Leaps in AAPL and the stock split 2:1, would the leaps also be adjusted, or would the become effectively worthless?

    Each contract would now be for 200 shares instead of 100.

    That would stink for option holders if it worked the other way smile.

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    Posted: 14 September 2010 04:40 PM #8

    incorrigible - 14 September 2010 07:22 PM
    CdnPhoto - 14 September 2010 07:09 PM

    I had a question regarding Stock Splits and Options.

    If I had 2012 Leaps in AAPL and the stock split 2:1, would the leaps also be adjusted, or would the become effectively worthless?

    Each contract would now be for 200 shares instead of 100.

    That would stink for option holders if it worked the other way smile.

    hmm, wouldn’t it make more sense for the number of shares to be the same, but the strike price to be half of the original amount?

    100 shares @260 becomes 200 shares @ 260 after a 2:1 split? Stock went from 260 to 130/share

         
  • Posted: 14 September 2010 04:51 PM #9

    Splits don’t effect option holders other than the per contract commission charge most brokerages have.

    I for one would love to see a split, recent examples of BIDU and BRK.B show hard evidence of at least a short term pop.  The biggest plus for AAPL would be the possibility of being added to the Dow.  Right now, because of their price weighted methods, there’s no way they can consider adding Apple to their index.

         
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    Posted: 14 September 2010 05:41 PM #10

    CdnPhoto - 14 September 2010 07:40 PM
    incorrigible - 14 September 2010 07:22 PM
    CdnPhoto - 14 September 2010 07:09 PM

    I had a question regarding Stock Splits and Options.

    If I had 2012 Leaps in AAPL and the stock split 2:1, would the leaps also be adjusted, or would the become effectively worthless?

    Each contract would now be for 200 shares instead of 100.

    That would stink for option holders if it worked the other way smile.

    hmm, wouldn’t it make more sense for the number of shares to be the same, but the strike price to be half of the original amount?

    100 shares @260 becomes 200 shares @ 260 after a 2:1 split? Stock went from 260 to 130/share

    The strike price is halved and the number of shares in the contract double; hence the value of the option stays the same.

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    “Knowledge speaks, but wisdom listens.”
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    Posted: 14 September 2010 05:45 PM #11

    [edit] incorrigible beat me to it

    [ Edited: 14 September 2010 05:48 PM by Apple II+ ]

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  • Posted: 14 September 2010 05:50 PM #12

    How many 10’s of thousands of self directed retirement plans pass over AAPL because they don’t understand that only 2, 5 or 10 shares is still a good investment?

         
  • Posted: 14 September 2010 08:16 PM #13

    While i’ll be the first to agree that splits are mathematically meaningless to valuation,  if there are some positives, then there really is no strong argument against a stock split. I can recall talking about stocks to some people who I know aren’t dopey, yet they talk about Apple as being expensive based on share price alone. Simply put, why not?

         
  • Posted: 14 September 2010 10:56 PM #14

    I remember when Apple was $80 and it split. It did not take that long for it to back to $80. In my world everyone I know says Apple is too expensive to buy even though they know it’s a winner. A 10 to one split I believe would create a lot of interest.
    Bob

         
  • Posted: 14 September 2010 11:23 PM #15

    galleybob - 15 September 2010 01:56 AM

    I remember when Apple was $80 and it split. It did not take that long for it to back to $80. In my world everyone I know says Apple is too expensive to buy even though they know it’s a winner. A 10 to one split I believe would create a lot of interest.
    Bob

    The difference now is Apple has a market cap of almost one-quarter trillion dollars. A doubling of the share price no matter a split won’t come as easy.