You'd think that on Valentine's Day I'd have nothing but candy and roses for all of my favorite stocks. Like Apple Computer
The truth is that I'm so enamored with Apple that I claimed it deserved a spot among our coveted list of Rule Breakers. And that's why I feel more than justified to deliver a dose of tough love when needed. You know, like now.
In a press release issued Friday, Apple announced it will split its stock 2-for-1. Shareholders of record on Feb. 18 will get an extra stub for each one they already own. Total shares authorized will rise from 900 million to 1.8 billion. The stock will start trading on a split-adjusted basis on Feb. 25.
It's a meaningless move, really. A stock split won't alter the overall value of the company. It will just create more shares and cut the per-share entry price for potential new owners in half. Oh, and by the way, the claim on Apple's earnings and cash flow for these same owners will also be -- yep, that's right -- half the size of those who hold stock as I write this.
Frankly, the split really doesn't deserve the amount of digital ink I've spilled here. But the Fool in me feels duty-bound to call shenanigans. That's because I'm seeing really smart people, including journalists, analysts, and even our own Community members lauding the split. Why? Because people generally like to own a few more shares, and they like lower per-share buy-in prices. Don't get suckered in. A split is absolutely never a reason to buy a stock. If you like Apple's stock as it is right now, buy it. If not, ignore it. Feb. 25 won't change a thing. At least, nothing that's even the least bit important.
For related Foolishness:
- Apple just won't get Sirius
(NASDAQ:SIRI) . Why not, Steve? - Fellow Fool Rick Munarriz thinks Apple's shares will plummet in 2005.
- Apple shareholders: Isn't it time the company showed you the money?
- Amazingly, Apple is living up to the iHype.
Do stock splits remind you of portfolio gimmicks that overpromise and fail to deliver? Forget them. Get paid to invest instead. A free 30-day trial to Motley Fool Income Investor is yours for the asking.
Fool contributor Tim Beyers saw his Sun stock split three times, and it still went from a 20-bagger to a meager gain. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Fool profile, which is here. The Motley Fool has a disclosure policy.
