COTW: Stock Splits

June 7, 2024COTW: Stock Splits

  • On June 7th, Nvidia executed a 10-for-1 stock split, where each shareholder received nine additional shares for every share they owned at the market’s close on the day of the split. This means that the number of outstanding shares increased tenfold, but the market capitalization or value of the company remained the same. Stock splits are often considered positive for a company due to increased liquidity, positive investor sentiment, broader ownership, and enhanced market perception of the company’s growth prospects. Since the stock split announcement, Nvidia’s share price has increased by 27%.
  • However, a brief history of stock splits suggests that they typically have a negative impact on share prices after they occur, with stock prices often declining in the days and weeks following the split. For example, Apple’s share price rallied for two days following its 4-for-1 stock split in August 2020, gaining around 8% before sharply dropping around 14% in the two weeks following the stock split date. Similarly, Amazon’s share price dropped by more than 18% following its 20-for-1 stock split in June 2022, while Google dropped 8% after its 20-for-1 stock split in July 2022.
  • Nvidia’s share price, which has gained more than 140% year-to-date, has accounted for nearly 30% of the S&P 500’s year-to-date gains. Given the historical impact of stock splits on performance, will Nvidia fall victim to post-split ‘slump’, or will their surge continue?


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