I‘ve been analyzing Google as an tech industry expert for over a decade. When I learned it planned a 20-for-1 stock split for summer 2022, I knew investors would have questions. What happens to my shares? Should I buy now? Read on as I walk you through the nitty-gritty details.
Stock Splits Multiply Your Slice of the Pie
First question – what is a stock split?
A split increases the number of shares available by dividing each one into multiple shares. Take Google‘s pie worth $100 total. Pre-split with 10 slices, each slice is $10. Post 20:1 split with 200 slices, each slice shrinks to $0.50.
Your ownership percentage stays the same but is divided into more, cheaper slices.
Why Did Google Split Its Stock?
Before the split, Google Class A shares cost a steep ~$2,500 each. Research shows higher nominal share prices discourage smaller "retail" traders.
Google wanted to:
- Attract more individual investors – $100 more affordable than $2,500!
- Drive up trading activity and liquidity – more investors buy and sell
- Gradually boost share price – more demand raises valuations
Win-win to extend its shareholder base. Let‘s look at the details.
Here‘s How the Numbers Play Out
I pulled historical price and volume data to showcase the differences.
table {
font-family: arial, sans-serif;
border-collapse: collapse;
width: 100%;
}
td, th {
border: 1px solid #dddddd;
text-align: left;
padding: 8px;
}
tr{
background-color: #113cfc;
color: #ffffff;
}
| Metric | Pre-Split | Post-Split* |
|---|---|---|
| Share Price | $2,250 | $112.50 |
| Shares Outstanding | 6.79 billion | 135.85 billion |
| Market Cap | $15.3 billion | $15.3 billion (unchanged) |
| Average Volume | 1.61 million | 32.2 million* |
- projected initially
See the pattern? As shares outstanding multiplied 20x, prices divided by 20x in parallel. Capitalization stayed constant while ownership fragmented into smaller pieces.
Higher volume is the area to watch as a potential uplift over time.
Now let‘s discuss how this impacts you as an investor…
What It Means for You
I‘ll contrast implications for existing versus potential shareholders.
If You Already Own Alphabet Shares
Oddly enough, nothing changes with your actual position value. You simply hold 20x more shares at 1/20th the prior per share price.
- For example, if you held 50 shares at $2,000, now you have 1,000 shares at $100. Still worth $50,000.
Theoretically, rising demand could lift share prices gradually. But lockup periods initially limit insider selling.
- Plan to stick around for the long run!
If You Don‘t Yet Own Shares
For you, the split makes initiation finally feasible. Buying even fractional shares no longer breaks the bank!
Cryptically named Alphabet Inc. houses tech giant Google plus other bets. Strong core fundamentals make this a long-term winner.
Consider nibbling via dollar cost averaging. But don‘t wait too long – this bargain entry point won‘t last forever!
Still have questions? Ask me below! I‘m here to help decode Google‘s stock split as an industry insider. Invest wisely!
