When Tesla ( TSLA) announced its latest 3-for-1 stock split in June, the company said the move would help with “attracting and retaining excellent talent” by helping employees better manage their equity in the EV maker. Other motivations can also drive the decision.
A split can welcome these investors into the fold when they had previously viewed the cost of holding a share as prohibitive. This can make the inclusion of more expensive equities difficult, limiting their wriggle room for diversification. A typical retail investor works with a small portfolio, with the average Robinhood ( HOOD) account amounting to $4,000. While stock splits don’t alter the market capitalisation of a company, they can spark optimism among investors.įirstly, stock splits can be intended to induce a short-term bullish drive in a stock, as lower prices per share may make investing in the company more attractive to retail investors, increasing liquidityĪs retail trading has abounded, the accessibility of equities has become an increasingly important factor in driving the decision for a stock split. Major companies have engaged in similar stock splits, including Amazon’s 20-for-1 split announced in June, and Google’s split by the same amount in August. The Nvidia stock split was by no means unique.
The value of their holding is unaffected. Investors holding this stock will see their number of shares increase by the proportion of the split. For example splitting the stock in two, thus cutting the price of a single share in a company by half. US30 US Wall Street 30 (USA 30, Dow Jones)Ī stock split involves a dilution of shares by a predetermined amount.
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