The Dow Jones Industrial Average inched up 19 points Monday, after surging last Friday in reaction to the May jobs report. Let's take a look at what else happened.
1. Apple suddenly becomes affordable to masses with stock split
It's time to do the splits for the worldwide leader in tech. Apple (NASDAQ:AAPL) underwent a seven-for-one stock split on Monday. In case anyone found Friday's $647 stock price just too darn high, the company gave every shareholder six fresh new shares to bring the price down like a limbo dancer. It ended at $93.70 Monday.
True, at $647, Apple was untouchable to many small investors. Yeah, you can own one share of a company, but you worked hard for your year-end bonus, and you want to reward yourself with more than one piece of paper. So today, Apple made its stock more attainable for the normal guy. But why?
Well, maybe you've heard of Carl Icahn. He's the famous billionaire investor who bought tons of Apple shares and was bullying the company to do what he wanted. Expensive shares tend give uber-investors top access, so Apple's split will diversify its investor base. Different types of small and medium investors will be more likely to get involved in the Apple story, and that's a good thing for a stock.
The takeaway is that nothing changed fundamentally to Apple stock. Each share has claim to one-seventh as much of the company's profits, but they're one-seventh the price (and there are 7 times as many as before). The stock rose 1.6% in value after the split as mom-and-pop investors were pumped to finally feel the joy of an Apple share (even though they've never felt an iPhone).
2. Crumbs Cupcake stock continues to drop
Pour some sugar on me, baby, because the recent performance of cupcake-makin' chain Crumbs Bake Shop (UNKNOWN:UNKNOWN) hasn't tasted good for investors. The stock has fallen nearly 30% in the past month, dropped 13.4% in the last week, and dipped almost 2% Monday on growing doubts the company can even stay in business.
Crumbs offers hundreds of flavors but has two big problems. First, it's hard to charge a premium price for one product that consumers can also easily make at home. And second, ever since going public in 2011 through a $66 million merger, Crumbs saw its rapid expansion outpace the public's demand. The company aspired to open 200 stores by the end of 2014 but now has only 65.
The takeaway is that Sex and the City made the treat famous with Magnolia cupcakes (which are overrated, by the way, and don't have enough frosting), but all fads fade. Competitors have wised up and now offer products other than 1,000-calorie cupcakes, like coffee, ice cream, and pastries. Plus, the MarketSnacks team simply prefers Sprinkles Cupcakes and its "cupcake ATM."
3. Tyson Foods finally buys Hillshire Brands in big meat merger
How much does a Ball Park frank cost? It doesn't matter any more for Tyson Foods (NYSE:TSN), because it's buying the hot dog and Jimmy Dean sausage maker, also known as Hillshire Brands (UNKNOWN:HSH.DL). Both companies announced the mergers on their websites Monday, but the stocks moved in opposite directions.
Tyson stock fell 6.5% as investors wondered if they got ripped off. It all started when Brazilian-owned Pilgrim's Pride offered $45 per share to buy Hillshire on May 27. Finally the bidding war ended Monday with a $63-per-share cash deal that values Hillshire at $8.6 billion. Tyson ended up paying 68% more than the stock's price just a month ago.
That's an insane premium, since 25%-40% is a more normal premium price that acquirers will pay to take complete control of a company. Investors generally felt Tyson overpaid Monday, bringing the return of the deal into doubt. Meanwhile, Hillshire investors celebrated one last boost as the stock price approached the huge $63 knockout deal price.