back to article Apple stuns world with rare SEVEN-way split: What does that mean?

Apple surprised Wall Street on Wednesday by announcing the most aggressive stock split in its history – and just a month after Google executed its first-ever split. The iPhone maker's seven-for-one split, due to take place on June 6, will see the fruity firm issue six new shares of common stock for each share currently in …

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  1. veti Silver badge

    Translation

    "We want more, lower-investment, lower-information investors."

    Never a good sign. This is probably a good time to sell your Apple stock.

    1. DougS Silver badge

      Re: Translation

      Because increasing the potential pool of investors (if only slightly) is somehow a bad thing? Yeah, right.

      1. Tromos

        @Doug S Re: Translation

        "...increasing the potential pool of investors..."

        Really? I find it difficult to believe there can be many who yearn to be Apple shareholders but can only currently afford half a share. Rejoice, rejoice, you will soon be able to afford 3!

        It just isn't as sound an investment due to the transaction costs being a higher proportion of the share value. Tiny shareholdings in large companies aren't too popular with the companies either as it costs the same to mail a dividend cheque or company report to a majority holder as it does to the guy with a single share.

        1. jonathanb Silver badge

          Re: @Doug S Translation

          If you want to put $1000 on Apple shares, then at the moment you can only buy 1 share and you will have $475 in change left over. After the split, you will be able to put a lot more of your $1000 on Apple shares.

          People do build up their portfolios with those sorts of numbers.

      2. Steve Davies 3 Silver badge
        Holmes

        Re: Translation

        Don't get your knickers in a twist. Almost everyone here hates Apple with a vengance so comments like the first one are to be expected.

        1. messele

          Re: Translation

          Bit weird how the entire IT industry readership seems to be a single mass of borderline Aspergers golf-clapping bitter fuckwits though isn't it?

          1. TheRealRoland

            Re: Translation

            Hey! Who are you calling borderline here?

            All kidding aside - glad that the Reg readership is considered 'entire IT readership'. High praise!

          2. craigj

            Re: Translation

            You've not worked in IT very long, have you?

    2. Anonymous Coward
      FAIL

      Smoke and Mirrors

      It is intended to be an illusion, a magician's sleight of hand, smoke and mirrors. It is merely a psychological trick to make Apple stock / shares "appear" to be very good value.

      Most private investors don't look at stuff like fundamentals, perhaps not even the P/E ratio. By making them appear cheap and affordable they want to drive demand even higher...but why? For the obvious reason that the fundamentals are not showing enough growth potential so tricks such as buy-backs and splits are artificial ways to make the stock attractive to the unaware.

      There WILL be a short term rise due to this, but the smart money and investors will be selling into this rise to offload their positions, in my humble opinion.

  2. ratfox Silver badge

    No change

    The investors who cannot yet invest because the share price is too high are barely worth a rounding error for a company with such a massive market cap. I'd be surprised to see any difference, even in volatility.

    …Why divide by seven??

    1. Beamerboy

      Re: No change

      "…Why divide by seven??" - new Apple strategy now derived from children's wizarding books, simple!

    2. TRT Silver badge

      Re: No change

      And I saw a beast coming out of the sea. It had 10 horns and 7 heads, with 10 crowns on its horns, and on each head a blasphemous name. The beast I saw resembled a leopard, but had feet like those of a bear and a mouth like that of a lion. The whole world was filled with wonder and followed the beast. People worshiped the dragon because he had given authority to the beast, and they also worshiped the beast and asked, “Who is like the beast? Who can wage war against it?”

      I saw in heaven another great and marvelous sign: seven angels with the seven last plagues.Then one of the four living creatures gave to the seven angels seven golden bowls filled with the wrath of God.

      1. Tom 38 Silver badge

        Re: No change

        And then I saw, like UNICORNS man, but floating on the air, with SEVEN horns, and on each horn, a blueberry sundae.

        Seriously, revelations reads like a bad trip. Most of the new testament is all like "hmm ok, good parable, don't be a dick, be nice to each other", and then there is all this batshit insane bullshit whacked on the end.

        I was raised a Christian, but in the Anglican church you tend not to hear much about revelations, just the parables. I think when I read revelations, I realised that this book wasn't handed down by god, it was made up by a bunch of men in order to control other men. Fuck that.

        1. Obitim

          Re: No change

          Me and Jesus? We used to walk everywhere man!

          1. MrMur
            Coat

            Re: No change

            To be fair, he carried you some of the way.

        2. Nigel 11

          Re: No change

          Seriously, revelations reads like a bad trip

          Probably, that's exactly and literally what it was.

          Until recently, it was not understood that if grain was stored damp (ie after a bad harvest), a fungus called ergot would grow on it. The fungus produces ergotamine, which has effects similar to a bad LSD trip. And since an entire community likely ate bread baked from the same batch of bad wheat, they all went on a bad trip at the same time, and that made it even harder to dismiss the (shared) experience as mere hallucination.

          Revelations indeed, though not divine.

        3. P. Lee Silver badge
          FAIL

          Re: No change

          > in the Anglican church you tend not to hear much about revelations, just the parables.

          So you only looked at a small part of the middle of the book and then were surprised when you didn't understand the ending?

          I'm shocked!

          A bit of an indictment on the level of help provided by the church.

          1. Tom 38 Silver badge
            FAIL

            Re: No change

            in the Anglican church you tend not to hear much about revelations, just the parables.

            So you only looked at a small part of the middle of the book and then were surprised when you didn't understand the ending?

            So you looked at my words and couldn't comprehend their meaning and then surprised you didn't understand? At no point did I discuss how much or how little of "the good book" I have read. In fact, I've read every single page, chapter and verse - all I mentioned was what the vicars-with-no-elbows tended to talk about.

            Gwan, post a come back. A man that returneth to his folly is like a dog that returneth to his own vomit.

      2. Anonymous Coward
        Anonymous Coward

        Re: No change

        What are the 10 horns and crowns though? Board members? Product line?

    3. Annihilator
      Coat

      Re: No change

      Because 7 is the most magically powerful number, and Voldemort split his soul into 7 parts in an attempt to live forever and dominate the muggle world.. Can only assume Apple is following the same logic.

    4. Lord Raa
      Trollface

      Re: Why Divide by Seven?

      Because they cannot get away with dividing by zero.

      Or perhaps someone rolled a D10 and that's the result?

      1. Allonymous Coward

        Re: Why Divide by Seven?

        Chuck Norris can get away with dividing by zero.

      2. Mpeler
        Pint

        Re: Why Divide by Seven?

        Because someone in Cupertino likes the repeating decimal

        142857142857142857142857142857142857142857142857142857142857... (you get the idea)...

        Try it: divide any non-multiple of seven by seven...voila...

        (too late for Pi day, 22/7, but there's always room for jello...apple jello?)...

        beer, because it goes well with pizza-pie :)

        1. xylifyx

          Re: Why Divide by Seven?

          Yes but a decimals are rounded at a certain point. Who collects the tail of the decimals? Let me guess, the same people who decided on the 7 way split.

          1. Annihilator

            Re: Why Divide by Seven?

            What rounding error? If you have 1 share today, you have 7 shares tomorrow.

            The worth of these shares are whatever anyone is willing to pay for them. The stock market will adjust itself up or down on the first morning of trade regardless. Just because a share is $500 at the close of business Friday, doesn't mean the new ones are worth $71.42857... on Monday.

    5. Eddy Ito Silver badge

      Re: No change

      …Why divide by seven??

      A few possible reasons: First, it gets the stock price down into the range for potential inclusion into the DJIA.

      Second, it works with the stock buyback and allows investors to realize some of the profit they have made over the years without totally cashing out.

      Lastly the split and buyback gives them a "reboot" on the EPS (earnings per share) and forces the analysts to do some hard thinking since a penny per share in earnings will now be a much larger swing than a nickel per share used to be. Don't forget that with the buyback there will also be more room for Apple to manipulate their quarterly EPS with finer control.

      In all, I like the move as it should be good for both the investors and the company. It is a sign they are moving to the value stock category from being a growth stock. Not a bad thing as "value" often outperform "growth" in real terms for investors.

      1. Anonymous Coward
        Anonymous Coward

        Re: No change

        In the USA, capital gains are taxed more and differently than dividends. So a common way for companies to pay dividends is distribute shares instead of cash. And the way you then cash in your shares is to sell them back to the company, in a share buy-back scheme, thus avoiding the stockmarket and brokers fees.

        This is useful for small-ish investors, not for trusts and funds. To make this useful, the granularity of the share transactions has to match the amount of cash that small investors want to take out of the market.

    6. Tom 13

      Re: Why divide by seven??

      Because at least one of the big wigs want to pull some of his profits out of the company without losing influence. Seven way split lets him sell of up to 1/7 of his shares and still be a whale.

      1. DougS Silver badge

        @Tom 13

        Wow, you really have no idea how the stock market and shares work at all do you?

        Here's a hint. If you own 1% of a company, and its stock splits 100x, you still own only 1%. You can sell x shares before or 100x shares after if you want to pull some of your profits out of it, and you lose exactly the same amount of "influence" (i.e. voting) either way.

    7. S 11
      Coat

      Re: Why divide by seven

      I think this is a way to make it appear to have 7 horses in the race, and reach out to investors who might see an opportunity in the lower price.

      I've never been an Apple fan, but I don't see any more hardware innovation from Apple on the level of importance as the iPod or iPhone. While they've managed to retain a HUGE market cap, and P/E is relatively good at 13.49, the "what have you done lately" crowd is focused on the holiday shopping horizon.

      Will there be new devices from Apple, or only hardware/software upgrades?

      Arduino is coming on strong.

    8. xylifyx

      Re: No change

      Follow the money, who collects rounding error difference.

  3. Nosher

    It would be vaguely amusing if some automated (and slightly dim) trading system woke up on Monday and detected this as a price crash, dumped a zillion shares in response and triggered a real share collapse.

    1. Brenda McViking

      What is much more likely is the average "mom and pop" investor will not update their stop-loss orders and get stopped out of the market.

      The other thing is that employee share plans are pretty difficult to do with a 3 digit share price.

      But in the markets there are plenty of people (even rich ones) who don't really know how stocks work and will not have bought Apple because it "was too expensive."

  4. Nigel 11

    Seven for one: WHY??

    It baffles me why a company ever splits its shares other than ten for one. That way you can keep track of how your investment is doing (just read the digits and move the decimal point for the pre-split value).

    Two for one and five for one are manageable with a little thought. Seven for one perhaps suggests that the company wants a complete disconnect in investors' minds between the old and new share price. What do they know is coming, that we don't?

    1. TRT Silver badge

      Re: Seven for one: WHY??

      Because it want's to appear Snow White rather than Sleeping Beauty?

  5. menotu

    Barnum & Bailey

  6. aurizon

    Breaking new ground, Apple announces the consolidation of all its shares into one really really big share. Former shareholders of various numbers of shares will be issued with iCloud Splinter Share Fractions (iSSF), which will only be tradeable through the App Store, which will charge a 30% transaction fee.....

  7. Anonymous Coward
    Anonymous Coward

    low-information investors

    "We want more, lower-investment, lower-information investors."

    I think this is actually the case -- some professional investors are definitely yahoos, but in general will objectively look at Apple's business plans when deciding target prices they will buy and sell at. General populous, a lot of people are pretty irrational about Apple, thinking they are flawless, peerless, and can do no wrong. Some of these people might buy up stock at $75 a share they would not buy at $525 a share. These people will behave irrationally and drive up the stock price even if actual company performance doesn't warrant it.

  8. majorursa

    Investing in toys

    It's hard to believe anyway that such a large amount of economic wealth, consisting of retirement funds and similar, are invested in what is essentially a toy factory with no future plans.

    1. Anonymous Coward
      Anonymous Coward

      Re: Investing in toys

      Bile

  9. ecofeco Silver badge

    Yes, but...

    What CLASS of stock?

    This is important.

    1. Tom Maddox Silver badge
      Trollface

      Re: Yes, but...

      Well, it's issued rolled-up on a cardboard tube, if that's any hint.

  10. Greg Williams

    In my (somewhat dubious) opinion, I believe that the high share price in a quid pro quo effect actually provides value to the company in the sense that the high share sticker price gives the company a 'premium' feel (which is of course pretty much all Apple trades on with its products also).

    By splitting them as they have they essentially make the company 'feel' cheaper even if this is obviously not the case.

  11. macaroo

    The Fruit Company

    Forrest Gump and Lieutenant Dan will be happy....maybe they can buy another shrimp boat.

  12. securtiy

    honestly im not surprised. Their products are getting cheaper, the quality is getting weaker and the product itself is just not what it was. I plan on switching to a different brand, just havent decided which has the aesthetics that apple does.

    1. Anonymous Coward
      Anonymous Coward

      more bile

  13. Daedalus Silver badge
    Devil

    The last seven-way split I heard of....

    ...was Voldemort's soul.

    Ya know, that might explain this....

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