As you may be aware Apple announced last week that they will be splitting their stocks at the end of the month. Apple (AAPL) is set to split its stock 4-for-1 on the 31st of August.
What is a stock split?
A stock split is an action taken by companies who have witnessed an increase in share price to levels that are either too high or are beyond the price levels of similar companies in their sector, to divide their existing shares into two or more shares.
Why does a stock split occur?
The primary motive is to make the shares more affordable to small investors even though the underlying value of the company has not changed. Often companies make such moves because they would like their stock to be more accessible to a broader base of investors.
What is the split ratio?
Apple announced it will split its stock in a 4-for-1 offering.
What does a stock split mean to investors?
Each share of Apple stock that an investor owns before Ex-Date (Aug 31st, 2020) will be eligible for a stock split. E.g Apple investors will receive 3 additional shares and the stock price will be one quarter.
Important implications of the AAPL stock split
• The number of shares of each client’s position will multiply by four (Apple).
• Post-split, the open price of each position will be adjusted, which will be the original price divided by the new split number.
• The estimated post-split price will be 1/4th Apple of the closing price on the 28th of August.
• All pending orders at the time of the split (Buy Limit, Sell Limit, Buy Stop, Sell Stop, Buy Stop Limit and Sell Stop Limit) will be deleted.
Please note: All open and pending Demo account AAPL orders will be deleted as of a result of the stock split. Stop losses and take profits will be removed.
Example of a stock split
Let's say you hold 100 units in company A at a price of 1,600USD per share and company A announces on X date, that it will be issuing a stock split of 4 for 1.
This means that, for every 1 share you hold, you will be issued 4. So now you will hold 400 units at the reduced price of 400USD
Note that the overall contract value remains the same:
100 units x 1,600USD = 160.000 USD | 400 units x 400USD = 160.000 USD
-Source of information: ICMarkets.com