FEAR & GREED | Business News Ask Fear & Greed: How does a stock split work?
May 28, 2025
Why do companies opt for stock splits? Discover how these splits increase share quantity while preserving overall value, making stocks more appealing to retail investors. The conversation delves into the rarity of stock splits in Australia compared to the U.S. and the challenges of valuing shares after a split. Notable cases, like Berkshire Hathaway's refusal to split its shares, also provide intriguing insights into market behavior.
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Stock Splits Increase Accessibility
- A stock split increases the number of shares while decreasing the price per share proportionally.
- This does not change the company's total value but makes shares more accessible to retail investors.
Stock Splits Less Common in Australia
- Australian companies rarely do stock splits compared to US companies.
- The main reason for splits is to improve liquidity and accessibility for smaller investors.
Notable US Stock Splits Examples
- NVIDIA recently did a 50-for-1 stock split, illustrating how aggressive splits can be in the US.
- Apple has done about five splits in its history, reflecting long-term growth and increasing share price.