Apple Stock Splits 4-for-1. What does it mean for investors?

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Well, during Apple's Q3 earnings results released on Thursday, over in the United States, Apple announced that they were going to be doing a four-for-one stock split. The board of directors has approved the four-for-one stock split. So, in this video, we're going to be talking about, well, what is a stock split, how does it work, and what does this mean if you're an Apple shareholder?

Well, let's answer some of those questions straight off the bat. Essentially, what this means for Apple: a four-for-one stock split means that if you hold one Apple share before the stock split, then after it you're now going to have four shares. So, your one share becomes four. It's a four-for-one stock split. It's actually less common; usually, you either just get two-for-one stock splits where one share becomes two or the three-for-one where one share becomes three.

So, what does it mean if you're an investor in Apple? Well, it doesn't really mean anything. Okay, straight off the bat, that's the first thing to understand: stock splits really don't change anything. There's nothing fundamentally changing about the company. The only thing that's going to change is the number of shares outstanding and the company share price because what you find now that you know I think Apple shares are currently around 400 bucks. They're doing a four-for-one stock split, so after the split happens, the 400 share price will revert back down to a roughly hundred-dollar share price.

What you'll also see is that the shares outstanding, which is just essentially the amount of shares that exist within Apple, are going to go up. Obviously, because every one share now becomes four shares. But really, fundamentally, nothing changes. So, that's the first thing to understand. I will reiterate: stock splits really don't mean anything for investors. You're in the exact same position before and after the stock split. Your investment is worth the same. Yes, the share price gets cut up, but to compensate, you've got more shares. So, net, you're in the exact same position.

So, why have Apple decided to do this? Well, their reasoning is to make the stock more accessible to a broader base of investors. Really, what this means is that they don't want the stock to become so expensive in absolute terms that people can no longer afford to buy a share in Apple. So, essentially, they want to try and keep the stock price affordable for most people because, generally speaking, you can't buy a fraction of a share unless, of course, you have a stockbroker that enables you to buy fractions of shares.

Enter the sponsor of this video, right? So, this broker that I use for all of my U.S. investing is Stake, and they do allow fractional share trading. So, it doesn't matter whether or not stock splits in that case don't matter at all because say you've got a hundred bucks to invest and the stock you're looking at buying is a thousand dollars. It doesn't matter that you can't afford to buy one share. On a brokerage platform like Stake, you can just buy a tenth of a share. Totally fine.

So, if you're with a broker that allows for fractional share trading, then stock splits, it doesn't even bother you. It doesn't bother you how expensive a stock is; you just buy the fraction of that share that you can afford. So, that's particularly useful for some of the U.S. companies with really high share prices. I'm talking about like the Amazons. Amazon share price currently like 3,000 U.S. dollars per share. Google, Google stock is currently at fifteen hundred dollars per share.

So, for a lot of people, a lot of us just average Joe investors, we just simply can't afford to pay that higher price even for one share in the company. So, anyway, back to Apple. Their reasoning for doing the stock split was to make the stock more accessible for a broader base of investors. But really, what this means is that they're just trying to make it more affordable for us average Joes, the 20% of the market, right? The retail investors.

And the reason I say that is because for the 80% of the market, the institutional investors, they are trying to build million or billion dollar positions in these companies. So, for them, it doesn't matter if the stock costs a hundred bucks or four hundred bucks or four thousand dollars because they are buying so many shares because they've got so much money to sink into these different companies. For them, it does not matter what the share price is; they can definitely afford it.

But obviously, Apple is held by a lot of average Joe investors like you and me that just, you know, we are small players, but we still want to own a share in Apple. We like their products; we like their business. It's very relevant to most of our lives. So, they like to keep the stock affordable for people like us where we don't have millions and billions of dollars to invest.

So, typically they like to try and keep their share price around a hundred dollars. We only have to go back to 2014 where they actually did a seven-for-one stock split because their stock price ramped up to seven hundred dollars. They did a seven-for-one stock split to get it back down to around about a hundred dollars. And even those, for all intents and purposes, stock splits don't really mean anything. They do have one or two effects, and one effect is pretty obvious: it increases the liquidity.

Okay, so it means that because there are more shares now floating around, it's far easier to get in and out of your investment. So, typically what you see after a stock split is it's easier for the stock to then be traded. Now I'm not talking about investors, people that want to hold the company for the next 10 years or anything like that. I'm talking about stock traders, people that don't really care if Apple sells iPhones or toilet paper; they don't even care. They just like to sit in front of the computer, watch a couple of charts, and click some buttons, get in, get out, make money.

For them, stock splits are helpful because it means the liquidity rises; there's more shares going around. So, it means for them trading, trying to get in and out and turn a quick profit, it's going to be easier for them to do that, right? It's easier to get into the stock; it's easier to get out of the stock.

And that's actually one of the reasons why Warren Buffett said he doesn't want to do a stock split for Berkshire Hathaway class A shares. He doesn't want traders to be messing around with the shares in for the A-class shares of his business. Essentially, he wants the A-class shares to stay in the hands of investors that believe in the company and are holding it for the long term.

Because if you think about it, if you're a trader of this stock currently, this is the most expensive stock in absolute terms; it's the most expensive share price in the world. One share of Berkshire Hathaway class A shares costs around 300,000 U.S. dollars. Now, personally, I would be sweating bullets if I held even one share of that. Firstly, because if you even just held one share, say in a morning session, the stock loses one percent, well, that's three grand just gone.

And also because they've never done these stock splits, there's not too many of these A-class shares floating around, so it is harder to get in and get out exactly when you want because there's just less shares being traded; the volume is lower. So, for Buffett, he deliberately keeps the traders away. What he thinks that will do is it will reduce the volatility of the A-class shares.

So, what he says he believes is that because all these people are in it for the long term, they're the people that actually believe in Berkshire Hathaway over a long period of time that the stock should stay closer to its fair value for more of the time. That makes sense because there aren't many traders trying to trade in and out of the stock, and that's swinging around the volume and having an impact on the share price.

But overall, we're kind of getting a little bit sidetracked. I think the main takeaway from this video if you are an Apple shareholder with this four-for-one stock split they're going to do is definitely don't panic because, at the end of the day, it really doesn't mean too much. Yes, it means there's going to be more shares; yes, it means there's going to be higher liquidity. But, to be honest, if it was me, I would not even care about that.

If I'm an investor and I want to hold Apple for the next 10 years, I don't care; they could split the stock however much they like. Really, I would not pay any attention to a stock split. You are in the exact same position before and after the split happens. Yes, after the split happens, the share price is lower, but you've got more shares to compensate. So, net before and after, exactly the same.

The only potential downside is what I was saying: cheaper stocks tend to be traded more, so they could potentially be more volatile. But, as I was saying, Apple is a big company with so many shareholders, so many... like, I just would not even worry about it.

So anyway, that is kind of the lowdown on this Apple stock split. Nothing to worry about, but I'd love to hear from you guys. What do you think? Do you think it was a smart move? You might actually find for Apple that this stock split actually helps because it could bring in a new wave of buying as people that want to own shares in Apple that simply haven't been able to afford that 400 share price now have an opportunity to buy. So, it might actually help.

You know, I might find a new way of buying for Apple stock. But anyway, who knows? I'd love to hear what you think. Leave that stuff down in the comments section below. Leave a like on the video if you did enjoy it or if you found it useful. As I say every time, it really does help the video out in the YouTube algorithm, so I definitely appreciate it.

So thank you very much. But that will do me today, guys. Check out Profitful; links are down in the description below. If you want to learn how to get started with investing—either passive investing or active investing, Warren Buffett style—or if you're an Australian and you want to... it's tax time right now in Australia, obviously, so if you want to learn to master your tax returns, then check out those tax courses that we've just put up there. Brand new; check them out as well, and I'd super appreciate it.

But anyway, that's where I'll leave this one for today, guys. Thank you very much for watching, and I'll see you all in the next video. Thanks for watching the video, guys. I just wanted to let you know that this video is being sponsored by Stake. So, if you don't know, Stake is the brokerage platform that I use to trade U.S. stocks.

The reasons that I like them, first of all, they are a brokerage free trading platform, which is awesome, and you can also access fractional share trading, which is super helpful. If you don't have heaps of money, you can still get started up with your investing over in the U.S. markets. So, the Stake platform is really intuitive; it's very simple to use, so I definitely encourage you guys to check it out and download it.

Also, check out the brokerage packs that they are setting up, which will come into effect on July the 1st, so that you can access the pack that is right for you with your trading or your investing. Now, the other thing I'll let you know is that if you download the Stake app and you use my referral code AWC, then Stake are going to give you one free stock. They're going to give you a share in either GoPro, Nike, or Dropbox, which I think is an awesome incentive that will help you guys get started.

So, definitely make sure when you make an account use the referral code AWC to take advantage of that free stock. So, a pretty good deal; make sure you get on it. Thanks always to Stake for sponsoring the channel, and I'll see you guys in the next video.