Comments on: Is It Better To Buy a Stock Before or After It Splits?

By: christine

christine — Fri, 12 Feb 2010 23:10:21 +0000

I owned 20,000 shares of WSEG then they did reverse split at 1000 to 1 which left me 20. it was showing trading of feb 12 $25.99 per share but before split it was only penny,s
but yet on my broker account it shows trading at on 0.025 worth nothing in my account how can that be? was the price jacked up to $25 before the split and I did not notice I don’t think so it was only penny stock? please explain?

By: anon

anon — Tue, 10 Nov 2009 02:39:40 +0000

I don’t think you guys quite get it. While it’s true that there’s nothing particularly great about a stock splitting, it does indicate that the share price has risen so high that it’s necessary to do a split – to preserve liquidity. So if a company likes to float around a certain price and has had several splits previously, that would mean they have also doubled in value several times previously, not necessarily a buy indicator, but not irrelevant either.

By: tiffany necklace

tiffany necklace — Tue, 01 Sep 2009 09:46:21 +0000

good post,thank you!

By: Customers Revenge

Customers Revenge — Fri, 27 Jul 2007 18:38:33 +0000

But conny: How does that help the company?

By: conny

conny — Fri, 27 Jul 2007 10:18:24 +0000

Splits help the investor to diversify when the investor have a limited amount of capital. A stock that trades for 10$ is easier to adjust the amount invested then a stock like BRK that trades for 3.600$(B) and 111.000$ (A).$

So if 111.000$ or multiples there of is considered a small part of your portfolio then splits don’t matter in the long run.

By: Customers Revenge

Customers Revenge — Thu, 26 Jul 2007 20:13:48 +0000

Check out the price of Berkshire Hathaway (BRK). A famous stock in a legendary company that has never split. I don’t think a split has much value. After all, the shares are owned by someone anyway so a split really produces no value for the company itself, hence neither for the shareholders except debatably liquidity due to affordability. About the only sure thing it does produce is fees to the bankers that have to execute the split.

By: JLP at AllFinancialMatters

JLP at AllFinancialMatters — Wed, 25 Jul 2007 18:44:53 +0000

Mitchell,

That’s only true if the dividend doesn’t split too. Most of the time everything associated with the stock adjusts for the split unless the company “raises” its dividend.

By: Jeremy

Jeremy — Tue, 24 Jul 2007 18:27:39 +0000

That’s true, mitchell. That is why I specified for people getting into a stock for the long-term don’t have anything to really worry about.

But you are right, there is always a little bit of a frenzy when a split is announced and some people try to profit on the short-term bump and speculation.

By: mitchell

mitchell — Tue, 24 Jul 2007 18:16:59 +0000

a quick note — it really depends on the individual stock. some stock splits don’t matter, don’t affect the price much. some do.

as a real-world example, i have a ~$0.40 dividend paying stock that splits in some form every 5 or so years, in the $40 range. once it splits, people tend to gobble it back up because a $0.40 dividend on a $20 stock is a somewhat attractive proposition. so the stock will tend to jump a bit immediately after the split, making the purchase beforehand worthwhile.

By: Jeremy

Jeremy — Tue, 24 Jul 2007 17:19:26 +0000

Well that is a possibility, but considering most discount brokers don’t charge based on the number of shares bought or sold and instead use a flat rate that probably wouldn’t apply to most investors.

But you bring up a good point, if you do use a broker that charges based on the number of shares sold then yes, that could be an important thing to consider.

Thanks for bringing that up!