Is it a positive or a negative impact to value when a stock splits?

Question

when is it better to purchase a stock before the split or after and what should be considered when looking at buying this type of stock?

Answer 1

People use the "excuse" that a stock that is splitting is doing well and the price of the stock is going up. We people watching the market already know that the stock/company is doing well and that is already figured into the price. So a stock split is just a marketing gimmick to get people to invest and to make the brokers more money (since some charge based on the number of shares you buy/sell)

Answer 2

There is no impact to value when a stock splits. Here is why. When a stock splits, say 2 for 1, the price of the stock will go down. This is generally why stocks are split, to lower the price to a level which will attract more potential investors. So, instead of having one stock for $50, you now have 2 worth $25 each. At the end of the day, your investment is still worth $50. Be careful when considering buying a stock about to split. Most stocks have a date that you have to have owned them by to be able to take advantage of the split. Just because you buy before the split does not necessarily mean you will get to partake in it.

Answer 3

The stock split itself has no positive or negative impact. That said, some traders are able to take advantage of a rise in price before the stock split and bail out before the split. Also, the fact that the stock is splitting means the stock has been doing well, so unless things change--and they could--buying a stock that's splitting won't necessarily be a BAD thing.

Answer 4

Neutral. Let's say I have a share of 10 shares of XYZ corp at $50 per share. When it splits, the number of shares doubles but the value per share is cut in half. Now, I have 20 shares of XYZ corp at $25 per share. My net holding is the same. Companies often split stocks to make it more attractive to buyers. Let's say a stock sells for $30 a share. The firm thinks people are more likely to buy it at $15 a share. Of course you can't can't screw the people who already own the stock. Hence, you split and make more of the stock (increase the supply by double gets you half the original price). It's not really bad or good. It gives you more granularity, like having an 8 speed atuo transmission.

Answer 5

Until we found out couples living together had the same or higher divorce rates, we heard the excuse that finding out about each other actually meant something. It doesn't. If you learn you can have great sex, you can still hate each other once you get out of bed. Marriage can't be taught...unless you know a place where giving and patience are learned like algebra. It's not even like it matters learning it before marriage, even living happily together for years. Marriage changes people. It doesn't feel like there are neutral corners you can go to for cooling off. Feelings, good and bad, are more intense and stay hot. So many married people withdraw, become dull and dense to the world because it's just too much. Have sex. Or not. Live together. Or not. It won't make a married relationship better.

Answer 6

That solely depends on the stock.

Ill give you two examples:

Firstly you own stock in a company, lets say its at 2 dollars a share.
You buy 50 of them. It splits and now you have one hundered 1 dollar shares. This will be the situation in both examples.

Situation 1:
You now own 100, 1 dollar shares, but the price drops .25 per share one day. Now instead of loosing .25 per share on 50 shares like you would of before the split, you actually loose .25 on 100 shares due to the split. The split therefore doubled your losses. (A loss of 25 bucks instead of 12.50)

Situation 2:
You now own 100, 1 dollar shares, and the price goes up a dollar.
If the split had not occured you would of only gotten 1 dollar for each of your 50 shares, but since it split, it went up a dollar for all 100 of your shares. Essentially doubling your profit. (A gain of 100 bucks instead of 50)


See, in both situations, the effect becomes double. You own twice the shares but they are worth half their price.

Its in your favor if the stock rises, but its far out of your favor if it goes down.

Answer 7

Theeconom is not quite correct. If you buy shares after the "as of" date, but before the actual split, you will be buying "wi" shares. wi means "when issued." they will be at the post split price and number of shares. And as to your question, LongAm is correct.

Answer 8

It is a positive thing for a stockholder when a stock splits.

Answer 9

Ignore splits - mean nothing at all.

Answer 10

positive buy before....