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Upcoming Stock Splits to Watch in February

AInvestWednesday, Feb 7, 2024 9:36 pm ET
2min read

A stock-split is an event that allows a publicly traded company to alter its share price and outstanding share count by the same magnitude, without having any impact on its market cap or daily operations. A forward-stock split is used to make shares of a company more nominally affordable for everyday investors, while a reverse-stock split increases a company's share price to ensure it meets the minimum listing requirements of a major stock exchange.

Why Companies Do Stock Splits

The real world of the financial markets, driven by macro trends and animal spirits, is more complex than items in a shop window.

If companies want their stock price to continue rising, why would they want to split it, effectively lowering the price? Here are a some specific reasons why:

1. Liquidity

Stocks can sometimes see price appreciation to the point where they are no longer accessible to a wide range of investors. Splitting the stock (i.e. making an individual share cheaper) is an effective way of increasing the total number of investors who can purchase shares.

2. Sending a Message

In many cases, announcing a stock split is a harbinger of prosperity for a company. Nasdaq found that companies that split their stock outperformed the market. This is likely due to investor excitement and the fact that companies often split their stock as they approach periods of growth.

3. Reducing Capital Costs

Stocks with prices that are too high have spreads that are wider than similar stocks. When spreads—the difference between the bid and offer—are too large, they eats into investor returns.

4. Meeting Index Criteria

There are specific instances when a company may want to adjust its share price to meet certain index requirements.

One example is the Dow Jones Industrial Average (DJIA), the well-known 30-stock benchmark. The Dow is considered a price-weighted index, which means that the higher a company"s stock price, the more weight and influence it has within the index. Shortly after Apple conducted its 7-to-1 stock split in 2014, dropping the share price from about $650 to $90, the company was added to the DJIA.

On the flip side, a company might decide to pursue a reverse stock split. This takes the existing amount of shares held by investors and replaces them with fewer shares at a higher price. Aside from the general stigma associated with a lower share price, companies need to keep the price above a certain threshold or face the possibility of being delisted from an exchange.

Most investors -- and this includes Wall Street professionals -- are honed in on forward-stock splits. Since July 2021, nine high-profile outperformers have conducted forward splits:

1.Nvidia (NVDA): 4-for-1 split

2.Amazon (AMZN): 20-for-1 split

3.DexCom (DXCM): 4-for-1 split

4.Shopify (SHOP): 10-for-1 split

5.Alphabet (GOOG): 20-for-1 split

6.Tesla (TSLA): 3-for-1 split

7.Palo Alto Networks (PANW): 3-for-1 split

8.Monster Beverage (MNST): 2-for-1 split

9.Novo Nordisk (NVO): 2-for-1 split

Upcoming and Recent Stock Splits

Here, we take a closer look at companies that have undergone stock splits in recent months. Not every name featured here is a recommendation, but this list of firms that are splitting their shares might be a good jumping-off point for interested investors.

Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.