years on the market
Last month, the American tech giant Apple announced a four-way stock split. Traders had hardly had time to digest this information before it was followed by a similar announcement from Tesla. Here’s why large corporations split their stocks, and how an ordinary trader can make money off of it.
A stock split means that a company’s existing shares are divided into several ones without actual new shares being issued. For corporations, it’s a way to make their shares more attractive and accessible to the public without changing the capitalization, or making extra investments.
Why do companies need it? More money means more product means even more money. Why do traders need it? Buying shares is a risky business, especially if the stock in question has significantly risen in price over the recent years, and the reluctance is understandable. Buying cheap shares, on the other hand, is a low-risk affair with a possibility of high returns. As an example, let’s take a look at Tesla’s stock, whose price went up 500% in one year.
When Tesla went public in the not-so-distant July 2010, the bold millionaire and philanthropist Elon Musk sold the company’s shares at less than $20 each. At the time of the split announcement, the price was about $1,500. It’s simple math: the price went up 75 times (!) over ten years.
Buying $1,000 worth of Tesla shares 10 years ago would return $75,000 at the time when the split was announced. Today, investing in such high-price assets (almost $2,000 per share) sounds both extremely appealing and insanely expensive to an ordinary investor. A five-way split will result in each share being offered at the affordable $400. And, just as importantly, it will remove any concerns that investors may have about getting involved with such high-level investments.
Considering the success of recent years, Tesla’s stock price will likely return to $1,000 in a short time, making the shareholders even richer. And we’re not only talking about big investors, the same holds for lower-profile investors who will be able to buy 5, 10, or 15 shares. Even one share will generate 150% of profit, provided the current market trends persist.
If for Tesla this is the first split in the company’s history, let’s turn to the time-tested split strategy used by a company from Cupertino, California.
Forty years ago, Apple went public offering 50 cents per share. Today, it sounds like fiction, considering that the current price is over $400. However, we’re talking about splits, not about unrelated price surges. The thing is, splits effectively increase the price many times. The last time Apple split its shares in July 2014, not too long ago. The price of one share went from $645.5 to $92.5 then. Six years later, the price is approaching $500 ahead of the upcoming split. This means the price has been rising up to 100% in a year! Now is the time for another split. Starting from August 2020, a single share will be priced at a little above $100. Missing such an opportunity would be a crime against your budget!
Grand Capital professionals regularly create ready-made and custom investment portfolios to suit any budget and profit goals. Without any doubt, Apple and Tesla will be the cornerstones of the latest portfolio. Leave a request with our experts, and we will help you start investing and making money from the major event in the stock market.
