Stock Splits Cater to Retail Investors
When a company splits its stock, it retains its market value, with the number of shares proportionately increasing as the price per share goes down. With numerous companies announcing stock splits this year, including Alphabet (GOOGL), Tesla (TSLA), and Amazon (AMZN), the rate of split announcements by companies in the S&P 500 is at its highest in 10 years.
Most of the time companies assert that the decision to split was driven by an interest in providing more investors with access to ownership.
Trading for the People
A recent report found that 17% of S&P 500 companies had share prices over $500 in early February. Many individual investors are priced out at these levels — especially if they want to own a diversified investment portfolio.
With the trend of lower or even commission-free trading, outreach to individual retail investors is in vogue.
Some have expressed concern that more democratized investing poses a risk to the unsophisticated investor. Last year, hype about GameStop (GME) prompted a halt to trading activity on some platforms due to extreme share price volatility. Market observers also point to the popularity of stock splits during the dot-com era, sometimes by companies that ultimately saw pricing support evaporate.
On the other hand, if high-quality companies split their shares, some believe retail investors may have an opportunity to swap more volatile but often lower-priced shares of small capitalization companies for larger cap names. Ultimately, investors may want to consider the value supporting the price before clicking “buy.”
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.