#349
Return Of The Splits
Published:
Aug 15, 2020
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Over the past few weeks, Apple and Tesla announced stock splits, 4-for-1 in the case of Apple and 5-for-1 for Tesla, to bring prices within reach of smaller retail investors.
Normalizing stock prices might seem reasonable in a world where an Amazon share costs over $3k and a Berkshire share costs over $300k. But with the rise of fractional share trading across most discount brokerages, should stock splits simply go the way of the Dodo?
In the U.S., fractional share trading represents an astonishing 35% of all stock buys, with Amazon, Tesla, Apple, Disney, and Microsoft the most popular. However, not all brokerage firms provide fractional trading.
Moreover, stock splits serve to make options more accessible (for better or worse) - as options are uniformly based on 100-share lots, making them exorbitantly expensive for highly priced stocks. Holders of fractional shares don’t have the same voting rights either - providing another vector for preferring the traditional stock split.
Splits or no-splits the market is spicy so in the good words of Ishmael Boorg, from the classic movie Kingpin, don’t get “Munsoned” out there.
Portfolio News
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Return Of The Splits
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