Both Apple (NASDAQ:AAPL) and Tesla (NASDAQ:TSLA) are splitting their stocks today (August 31).
Apple will split its stock on a four-for-one basis. That means Apple's existing shareholders will receive three additional shares for every one they currently own. The value of each share should drop by 75% – because post-split, the total value of four shares should be roughly the same as the value of one share prior to the split. Since Apple is trading near $500 per share, the share price should drop to about $125 after the split.
Tesla meanwhile will split its stock on a five-for-one basis. The electric carmaker's stock trades above $2,000 per share currently. After the split, the share price should drop to about $400. Existing shareholders of Apple and Tesla will see that they own more shares, but each share is worth proportionally less. The total value of an investor's position in that company doesn't change due to the stock split.
Leadership teams implement stock splits to lower the company's share price. The thinking is that a lower share price makes the stock available to a wider range of investors. Someone may not have $2,000 to drop on a single share of Tesla, for example, but they might be convinced to invest if that share were priced at $400 each. That more accessible price point should prop up demand for those shares, which in turn improves their liquidity.
Apple's stock has risen more than 25% since its split announcement, and Tesla's share price is up more than 45%. The S&P 500 stock market index has risen about 4% in the same time period.
