Stock splits are a form of “ corporate action,” and while that term may not sound too riveting, some of the most dramatic moves on Wall Street can usually be tied back to corporate actions. But for extremely popular stocks, splits are often perceived as a positive, because they effectively lower the price per share, making them more accessible to a wider pool of market participants. The ultimate impact of a stock split tends to vary widely-meaning there’s no guarantee on price direction after a split. Stock splits only impact the number of shares trading in the market, not the overall market capitalization of the company. Nvidia announced in late May that it would execute a 4-for-1 stock split on July 20, which essentially meant that after that date, an investor holding one share of NVDA worth $750, would hence own four shares worth $187.80. Shares in NVDA are up roughly 50% so far in 2021, and were trading about $750/share prior to the split. Nvidia’s impact on the chip industry is underscored by recent performance in its underlying stock. More recently, the chipmaker has been making waves in the artificial intelligence and data center sectors. Nvidia has transformed into one of the hottest names in the tech world as global gamers and cryptocurrency miners have flocked to their offerings. The intent of a split is usually to make shares more affordable to a wider pool of market participants, which in turn can improve the liquidity of the shares in the marketplace. Stock splits occur when companies break up existing shares to create a higher number of lower-value shares. On July 20, Nvidia completed a 4-for-1 stock split, executing on a plan that was announced back in May 2021. Last week, Nvidia (NVDA) became the biggest name to follow suit.
Last year, Apple (AAPL) and Tesla (TSLA) made big news when each company announced respective stock splits.
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