For market watchers who may not have been keeping up on the latest Apple (NASDAQ:AAPL) news, don’t worry — the Cupertino, California-based company’s stock is not in free fall. After closing at $645.57 on Friday, Apple shares began trading at $92.69 Monday after the stock underwent a previously announced seven-for-one split. The split gave every Apple shareholder of record six additional shares for every share held.
While the split doesn’t change Apple’s overall market value, the lower entry-level price of the shares does make it far more affordable for the average investor. It also vastly increases the company’s total number of shares. Apple’s outstanding stock went from approximately 861 million shares to around 6 billion shares, according to statistics provided by Yahoo Finance.
Apple first announced the seven-for-one stock split plan on April 23, the same day it revealed its financial results for its fiscal 2014 second quarter. Since then, Apple’s stock has risen more than 21 percent while repeatedly setting and surpassing several 52-week records. Apple’s stock went as high as $651.26 in midday trading on Friday, the highest it has been since the $705.07 peak it reached in September 2012. However, it’s not clear how much of that rally can be attributed to the stock split.
Besides announcing a stock split, Apple revealed plans to expand its share repurchase program by an additional $30 billion. The company also boosted its dividend for the second time in less than two years, raising it by approximately 8 percent to $3.29. Several other events may have further fueled Apple’s climb. Soon after Apple announced its March-quarter earnings results, a report from market research firm Kantar Worldpanel ComTech showed that the iPhone maker had boosted its market share in several key overseas markets.
More recently, Apple confirmed it was buying Beats Electronics for $3 billion. The deal included Beats Music, the company’s nascent subscription music streaming service, as well as its premium headphone and speaker business. The acquisition brought Beats co-founders Jimmy Iovine and Dr. Dre on board at Apple. The unusual size of the acquisition and the addition of a subscription music streaming service may have sparked investor excitement and contributed to Apple’s recent rally.
While a stock split does not change the overall value of a company, it can have an effect on investors’ psychology. Analysts were divided on the impact that Apple’s stock split would have on trading. Greywolf Execution Partners chief technical analyst Mark Newton told CNBC on Friday that Apple’s stock split will likely spark a short-term selloff. Piper Jaffray analyst Gene Munster called the split a “mild positive for shares” soon after it was announced by the iPhone maker.
Besides potentially attracting more investors with a lower entry price, Apple’s stock split may also qualify it for an exclusive club. As reported by the Associated Press, Apple’s newly lowered stock price could make it more likely to be selected as a one of the 30 Dow Jones Industrial Average stocks.
The Dow Jones selection committee generally avoids stocks that trade above $300, since it creates an imbalance in the way that it calculates the benchmark’s value. Regardless of whether the stock split leads to Apple being selected for the Dow Jones Industrial Average, investors who may have previously wanted to become Apple shareholders but didn’t want to spend more than $600 per share now have an opportunity to own a more affordable — albeit smaller — piece of this company’s future.
More From Wall St. Cheat Sheet:
- Can Apple Conquer China’s Smartphone Market in 2014?
- Don’t Forget About Dre: Here’s What the Rap Star Will Bring to Apple
- Here’s What Apple’s Newly Opened Touch ID Will Do for Mobile Payments
Follow Nathanael on Twitter @ArnoldEtan_WSCS