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The share price of Apple (NASDAQ:AAPL) has been pushing higher today as the company prepares to split its shares at a 7 to 1 ratio after the market closes today. Apple shares opened this morning at 650.00, up from yesterday’s close of 647.35. Even though the share price has not returned to the record high of 700.09 it established on 17 September 2012, the powers that be may have become more concerned of late with the decline in the number of shares traded.
In the period from February 2012 to January 2013, Apple’s volume exceed 20 million shares per day on a frequent basis, even exceeding 30 million per day on a fairly regular basis. Trading volume has more often been in the 10 million range over the past 12 months. It has passed the 20 million mark only six times in the past six months. Given the stresses created by a lackluster economy, Apple has surely determined that the man on the street simply cannot afford the hefty 650.00 per share investment. Hypothetically speaking, should the share price close at 644.00 today, each share will be worth worth 92.00 on Monday.
There is often a mystical aura about owning shares in a stock that splits. It’s just the idea that you have more. Sure, you have more shares, but they do not provide you with any additional worth. On the positive side again, you can now acquire shares, in this case at least, for one-seventh of what it cost to obtain them in the past. So there is a “sense of value” based on the fact that now you can buy seven for the same price you used to have to pay for one.
For Apple, however, I continue to believe that the key is found in the trading volumes. It is highly likely that the split will generate more actual interest in the stock. It is also likely that the share price could soar next week because the people who were not heretofore willing to invest 650.00 per share will be much more motivated to buy in the 92.00 to 100.00 range, as the enthusiasm drives the share price higher on Monday and even through the next week. Of course, when that happens, the Apple shares held by investors today actually will have more value come next week.
Perhaps the reality is that holders of a stock that is about to split are not as excited about having more shares as they are that they expect the lower price of the split shares will create a buying frenzy that will, after all, increase the total value of their shares held. The last time Apple split its stock, the share price increased by seven times.
This split may also position Apple for further potential as the new share price will position Apple right at the median price range of companies included in the Dow. If the Dow were to add Apple, the stock should gain even more credibility, out of which it should expect yet another gain as funds based on the Dow add Apple to their portfolios.
