Apple stock split 2020: what you need to know

Apple stock split 2020

Apple’s upcoming stock split will see investors issued with four new shares for every one they currently own. These shareholders will continue to own the same proportion of Apple stock, since the company will effectively increase the number of shares in circulation by dividing existing shares in four.

The split has been approved by Apple’s board and is scheduled to take place on 31 August 2020. Apple shareholders on record as of 24 August 2020 will be eligible to receive the new shares.

Why is Apple splitting its stock?

While Apple has not given an official reason for 2020’s split, it is likely that the company thinks that its high share price could deter new investors.

The company has previously split its stock four times when its shares have seen significant price increases, as highlighted in the table below. In the first three instances, stocks were split in two when the price was near triple figures. Then, in 2014, share prices rose sharply and a higher split ratio was used.

While a stock split might be carried out to encourage investment, the split in itself doesn’t affect the market capitalisation of a company. Existing shareholders will own more stocks, but each of those stocks is worth less, so there is no change to the total market value of the company.

Stock divides might not directly increase share prices, but they can often result in higher share prices further down the line. By making shares accessible to new investors, demand can increase, causing the share price to appreciate and the total market capitalisation to rise.

Apple stock has appreciated enormously since the company’s last split. It became the first ever publicly listed business to be valued at more than $1 trillion in December 2019, then the first US company to breach $1.5 trillion in June 2020.

Apple stock split history

Apple stock split example

An investor buys a share in Apple in January 2005, so they have one share worth $77.00. After the two-for-one stock split a month later, they own two shares in Apple, but each of these shares is worth half the amount, at $38.50. If the shareholder keeps these two stocks until May 2014, they will be worth $1,266 ($633 each) as the stock price appreciates. With the fourth stock split, each of these stocks will then be split seven times, so that the shareholder owns 14 shares in Apple.

Apple’s split-adjusted share price

When looking at the value of a company’s shares, it can be difficult to interpret how successful the company has been based on its stock prices following a split. Apple’s current share price of around $408 doesn’t look as impressive as it would have done ahead of its four stock splits.

This is where split adjusted figures come in – they account for stock splits when working out return on investment. With Apple, stock adjusted figures would acknowledge the fact that one stock bought during its initial public offering (IPO) would now have become 56 shares.

Long-term Apple shareholders have seen an incredible return on their investment; a $22 share in the company when it first went public in 1980 would be worth approximately $22,896 at the time of writing – a return of 103,973% (before inflation and not including dividend payments).

Apple’s first stock split: 16 June 1987

Apple’s first stock split occurred on 16 June 1987, seven years after it became a public company, and it was a two-for-one stock split. It kept share prices low enough to make them accessible to investors. There was a 2% rise in stock prices over the following year.

Apple’s second stock split: 21 June 2000

The second Apple stock split took place on 21 June 2000, and was also a two-for-one split. Ahead of the split in May 2000, the stock price was $84. Shortly afterwards though, in September 2000, share prices were halved as many technology companies experienced a rapid decline. This was around the time the dot-com bubble burst, where many companies went out of business and others decreased in value. Apple blamed lower-than-forecast sales, as well as a weaknesses in the education market. While Apple was affected temporarily, the company’s shares made a full recovery and went on to achieve new highs.

Apple’s third stock split: 28 February 2005

Apple’s third stock split took place on 28 February 2005, with the company once again allocating a two-for-one ratio. This took the number of common shares authorised from 900 million to 1.8 billion, after shares almost quadrupled in value. The press release announcing the stock split reported that Apple ‘continues to lead the industry in innovation … Apple is also spearheading the digital music revolution with its iPod portable music players and iTunes online music store'.¹ In the year following the stock split, prices rose by 60%.

Apple’s fourth stock split: 9 June 2014

Apple’s fourth and final stock split to date happened on 9 June 2014. This was the most significant of Apple’s stock splits, with a seven-to-one ratio taking shares from close to $700 down to around $100. Apple wanted to make shares accessible to more investors, but it’s also speculated that they set their sights on inclusion in the Dow Jones Industrial Average index. This index acts as a benchmark, with 30 stocks included from key economic sectors. As it’s a price weighted average, Apple’s stock price needed to be reduced before it was feasible for the company to be added. It was announced that Apple would join the Dow Jones in March 2015 and it has been a part of the index since March 2019.

Will Apple stock split again?

It seems unlikely that Apple will complete another stock divide in the near future. Share prices are still climbing (they are currently trading at around $186), however shares were worth close to $700 before the last split in 2014. Apple may consider another stock split if share prices continue to rise, but for now, this move probably wouldn’t be in the best interests of the company.

Apple announced its fourth stock split along with the news that its board of directors had authorised an increase to their shareholder capital return programme, and an increase to the quarterly dividend. This stock split was widely talked about as a way of making shares easier to purchase, with Apple Insider saying ‘we want Apple stock to be more accessible to a larger number of investors'.²

If Apple’s shares once again become excessively high in price and the media begin speculating about a share divide, it could indicate another stock split in the coming months.

¹ Apple, 2005

² Apple Insider, 2014