Two of the most valuable and popular public companies – Apple and Tesla – completed stock splits on Monday. Wondering what that entails? And what, if anything, it means for your investments?
Let’s start with how the process of a corporate stock split works.
Every publicly traded company has a number of stocks, or shares, that make up its total value. The combined worth of Apple’s stock reached more than $2 trillion earlier in August. Tesla, meanwhile, is valued at over $400 billion.
When a company splits its stock, its total value doesn’t change; it just ends up with more stocks, each at a cheaper cost.
Here’s a food metaphor: If you ask the guy at the pizzeria to cut each slice in your large pie in half, you’ll still go home with the same amount of pizza. You just have more, smaller slices now.