NOTE: This story was updated with fresh information June 9.
Now that the Apple stock split (Nasdaq: AAPL) has arrived - today (Monday) is the first day it trades at its new price - investors need to know exactly what's happening and how it will affect them.
Since the Cupertino, Calif.-based tech giant announced the 7-for-1 stock split on April 23, AAPL stock has gone up 18.5%. The split-adjusted AAPL price is about $92.50.
A 7-for-1 stock split is fairly unusual, as most companies typically do a 2-for-1 or 3-for-1 split. But it appears Apple was determined to get the share price below $100.
The reason Apple Chief Executive Officer Tim Cook gave in April was that the company wanted to make AAPL stock "more affordable."
Experienced investors know that the share price is irrelevant, but Cook realizes that a lower price at least makes a stock appear more affordable.
A more likely reason for the dramatic 7-for-1 split is that Cook wanted to get the price to where AAPL could reasonably be considered for inclusion in the Dow Jones Industrial Average.
Because the Dow is price-weighted, AAPL at $600 or $700 would have distorted the index. But AAPL at $90 or $100 would fit right in with other Dow components.
While being part of the Dow doesn't affect revenue or profits, it does bestow a certain degree of prestige. And it could be that Cook feels Apple now deserves membership in that exclusive club.
So that's the "why" behind the AAPL stock split. But there are a lot of other nitty-gritty details that investors should be aware of.
What You Should Know About the Apple Stock Split
First, let's get the key dates out of the way.
- The Record Date was June 2. Investors who owned AAPL shares as of this date are entitled to receive the additional shares due to the split.
- The Split Date was June 6. The AAPL shares split after the market close.
- The Ex Date is June 9 - today. AAPL common shares start trading at the new split-adjusted price.
Here are a few other facts investors need to know...
The Share Price: AAPL opened at $92.69 this morning. Since AAPL's all-time high was $705, the split-adjusted price will need to cross $100.72 to reach a new record high.
How It Works: If an investor owns 10 shares of AAPL at $630 a share before the split, that investor will own 70 shares at $90 after the split. The market value of the shares remains exactly the same at $6,300.
The Dividend: Like the stock, the dividend per share also gets divided by seven. So instead of $3.29, the AAPL dividend will drop to $0.47. Investors will get the same payout and yield (well, at least until Apple raises it again.)
Tax Implications: Because the market value remains the same, as does the amount of the dividend paid to each investor, the AAPL stock split will not affect taxes owed by U.S. investors in any way, although Apple recommends that foreign residents consult their tax advisers.
Shares Outstanding: The number of AAPL shares outstanding have increased from 861.38 million now to about 6.03 billion after the stock split. While Apple's market capitalization remains exactly the same, the extra shares do add some liquidity.
In-Between Days: Investors who bought AAPL stock between June 2 and June 6 will still get their new AAPL shares, but they will have to wait a few days while the trade goes through their broker's system.
Previous Splits: This is only be the fourth AAPL stock split in the company's history (and this one was clearly overdue.) The others were all 2-for-1 splits, which took place on May 15, 1987, June 21, 2000, and on February 18, 2005. Since Apple went public at $22 a share back in December 1980, the split-adjusted IPO price is now $0.39.
Are you affected by the AAPL stock split? Do you think the lower price will help push AAPL stock to a new high, or get it into the Dow? Tell us on Twitter @moneymorning or Facebook.
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About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.