Does a split affect the price of a stock? If so, than how? I have not noticed any half price reductions because of splits on the charts.
2006-08-03 00:28:04 · 10 answers · asked by Anonymous in Business & Finance ➔ Investing
Heres some good info on the charting part of my query which some people alluded to.
2006-08-03 01:37:09 · update #1
http://www.investopedia.com/ask/answers/05/splitleadgapping.asp
2006-08-03 01:37:35 · update #2
A split DOES affect the price of a stock, but DOES NOT affect the value of your holding. Example -
1. You own 100 shares worth $50 each. The total value of your holding is 100*$50 = $5000.
2. The company announces a 2 for 1 stock split. The number of shares you own will double, but the price of each share will halve.
3. After the split you own 200 shares worth $25 each. The total value of your holding is 200*$25 = $5000.
The only reason to split a stock is to attract more buyers. Many retail investors do not like buying stocks with a high $ value because it means they can't afford to buy many of them. There is limited evidence that stock splits work and the price does go up afterwards but you should always remember that the value of the business is not affected. That is the reason why the charts are normally adjusted after the split.
2006-08-03 01:04:30 · answer #1 · answered by popeleo5th 5 · 1⤊ 0⤋
When a stock splits... that stock is 2 to 1 or 3 to 1 or 4 to 1 or more. Lets make a stock called HAPPY and its $100 a share. You own one share... so you total asset value is... $100. Let say the stock split 2 to 1, also noted 2:1. So now your HAPPY stock is $50 a share, but for every 1 share you own, you'll now have 2. Your total asset value is still $100, because you have 2 shares for $50.
Not sure what chart your looking at, but they tend to reflect the overall asset value of the company. Splitting the stock doesn't reflect the overall value of the companies stock.
Splitting is used to make the stock easier to purchase, because the company thinks the price per share is inflated per share, and it believes the price per share will continue to rise. Splitting the stock makes "chunks" of stock more manageable.
Have a nice day.
2006-08-03 00:37:59 · answer #2 · answered by Henry L 4 · 0⤊ 0⤋
yep.. but the action of splitting may have beneficial affects on the stock. More people may 'buy' it since it's a positive step. So for instance, if the stock sells for $100 and then splits 2:1.. it may be selling for $50.75 the next day. Plus the stocks are changing in price all the time.
The stock charts know that folks like you and me need a consistent base line for the price. So they adjust backwards the $100 price to $50.
2006-08-03 00:30:59 · answer #3 · answered by MK6 7 · 0⤊ 0⤋
Your all Semi RIGHT, the stock holds the same value 2-1 50= 100 but in a rising MARKET this stock is cheap and so more affordable less 100-2X50 so if it goes UP 5 bucks it took less out of your POCKET...some that pay dividends even up that too to COMP for the SPLIT
JIMMY CRAMER JR and believe me I DO ROCK
2006-08-03 01:10:25 · answer #4 · answered by Anonymous · 0⤊ 0⤋
Think of it this way. You have a $20 bill in your wallet. Overnight it changes to 2 $10 bills (a 2 for 1 split). You still have the same overall value ($20).
2006-08-03 04:47:44 · answer #5 · answered by Anonymous · 0⤊ 0⤋
1
2017-02-14 22:19:28 · answer #6 · answered by Anonymous · 0⤊ 0⤋
No it doesn't it just means that now you have two for what you paid for the price of one, but you get twice the returns should you sell your stock.
2006-08-03 00:33:04 · answer #7 · answered by mom of girls 6 · 0⤊ 0⤋
I'm pretty sure it does, yes.
2006-08-03 00:34:54 · answer #8 · answered by Anonymous · 0⤊ 0⤋
yes, that's the idea !
2006-08-03 01:01:15 · answer #9 · answered by Anonymous · 0⤊ 0⤋
No, it doesn't; that's the beauty of it!
2006-08-03 00:31:20 · answer #10 · answered by silvercomet 6 · 0⤊ 0⤋