-
MicroStrategy announced a 10-for-1 stock split, with its shares hitting $1,340.
-
Record high prices for stocks popular with investors have led to a boom in stock splits this year.
-
A group of companies with stock prices above $500 could be candidates for a split, a market expert told BI.
This year has been a big year for stock splits.
Microstrategy Amazon became the latest company to announce a split on Thursday, with the 10-for-1 stock split set to take effect in early August as its shares hover around $1,340.
Other major companies that have executed stock splits or announced plans to do so this year include: Nvidia, Walmart, Broadcom, Chipotle, Williams Sonoma, Strips, Sony, Lam for researchAnd Quiet Texas Land.
But why do so many companies split their stocks? Simply put, companies want to attract more investors. And many of the stocks split this year are household names, like Nvidia, which has become almost synonymous with artificial intelligence. One expert said the more expensive and popular a stock is, the more likely it is to split.
“The market is up — a lot — and the stocks that are most popular with retail investors are among those leading the charge,” Steve Sosnick, chief strategist at Interactive Brokers, told Business Insider. “The higher market means that more stocks are now expensive enough to warrant a split while the popularity among retail investors is what’s driving management to consider a split.”
“Frankly, if a stock has little interest from individuals, there is little reason for the company to consider splitting it.”
As for stocks that might be ripe for a split, Sosnick pointed to a few names trading above $500 a share as potential candidates. He highlighted companies like Autozone, Free Market, Eli Lilly, KLA Company, Netflix, gut instinct, AdobeAnd Meta platforms.
according to American bankStock splits can be rocket fuel for prices.
“The average return after one year is 25% versus about 12% for the broader market. The splits appear to be bullish across market systems, something management teams might consider if stocks appear too expensive to buy back,” according to Bank of America. He said in a memo in May:
But according to Sosnick, a stock split can also have a “buy the rumor, sell the news” effect on the stock price, at least in the short term.
“Since it doesn’t change the fundamental value of the company, it’s not uncommon to see a rally before the split, then a selloff when no new demand comes in. Chipotle is a good recent example of that,” Sosnick said.
Chipotle shares have fallen 12% since its 50-to-1 stock split in late June, one of the largest stock splits in New York Stock Exchange history.
Read the original article on Interested in trading
