Why did Apple and Tesla do a stock split?

What is a stock split? 

A stock split occurs when a company increases the total number of outstanding shares for the price of the same share, effectively breaking one share into several smaller whole shares. For example, a company could do a 4-for-1 stock split, where one $100 share would then become four $25 shares, and existing investors would get three extra shares for each one they own.

Here’s a food metaphor: If you ask the guy at the pizzeria to cut each slice in your large pie in half, you’ll still go home with the same amount of pizza. You just have more, smaller slices now

Apple and Tesla decided to go for a stock split to attract smaller investors as cheaper stock prices are more appealing.

So for each share of Apple someone owned on Friday, as of Monday they owned four. For Tesla, that number is now five.Investors were excited about this news — on Monday, shares of Apple rose 3.3% while Tesla shares gained a whopping 12.5%. Both stocks closed at record highs.

Stock splits are also just cosmetic changes in the number of outstanding shares a company has issued and the price of said shares. Splitting a stock does not change the value of a business.

Finally stock splits have become rare on Wall Street in recent years, with just three S&P 500 members announcing splits in 2020, compared to an average of ten a year over the past decade, according to S&P Dow Jones Indices.

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