A company has just announced a 3 for 1 stock split, effective immediately.?

Question

Prior to the split, the company has a market value of $5 billion with 100 million shares outstanding. Assuming that the split conveys no new information on the company, what is the value of the company, the number of shares outstanding and price per share after the split?If the actual market price immediately follow the split is $17.00 per share, what does this tell us about market efficiency?

Answer 1

You left off the price of the stock before the split. Anyhow, the market value should stay 5 billion, the 100 million shares will go to 300 million shares and the price of a single share will get cut into 1/3rd.

Since you left off the starting share price I can't answer the $17 market efficiency question or tell you the price per share after the split.

Answer 2

Based on your information, the pre split value of a share is $50. On the day of the split it is $16.66. The value of the company does not change because of the split. If the stock starts trading at $17 then that simply means that there is a lot of public confidence in and optimism for the company. Nothing unusual there.

Answer 3

Pretty heavy stuff. But there's a bottom line;
Splits mean nothing.

After the split and before trading the market cap doesn't change. You just have more shares (for 1/3 the price of the day before closing price).

Answer 4

It does no longer something. If it became 3 to a million then bail, because of the fact meaning the corporate is attempting to maintain the cost above the minimum cost (case in point the NYSE demands the inventory to be above $5 or below $4 for under a 365 days). possibility is the inventory could be dropping too.

Answer 5

1

Answer 6

Agree with WilliamH - no damning comments on market efficiancy in what was presented.

Answer 7

everyone answered the question perfectly already.

Answer 8

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