Stock splits can stir up a lot of investor excitement. Apple (AAPL +0.33%) is a perfect example. Since the tech hardware leader went public more than 40 years ago, Apple has split its shares five times and created massive shareholder wealth.
Stock Split
Apple's stock split history
Apple is one of the world's most valuable companies, with a current market cap of more than $3.7 trillion in late 2024. Its initial public offering (IPO) was on Dec. 12, 1980. The IPO price was $22, or $0.10 per share when adjusting for the five stock splits it has initiated in its history as a public company.
Some investors get excited about stock splits because they believe they make the stock cheaper. A stock split occurs when the company issues new shares, and as a result, the price of each share goes down.
But the valuation usually remains unchanged since the decrease in stock price and increase in shares outstanding usually offset each other. There's no change to a company's market capitalization or enterprise value.
Nevertheless, some investors think the split increases investor attention and causes the share price to rise before and after a stock split. Here's what Apple's history tells us regarding this belief.
Apple stock splits: 1980 to 2023
Apple has endured some tumultuous times, especially in its first two decades as a publicly traded stock. For the 20 years after its 1980 IPO, the share price had only doubled in value through Dec. 31, 2000.
Much like the stock splits in Apple's early history, the company's stock splits in the 2000s and later were preceded by a run-up in stock price. Performance in the year after the split was respectable, too. After another 2-for-1 split in 2005, Apple divided its last two splits by larger amounts in 2014 and 2020.
Stock Split Date | Stock Split | Apple Market Cap | Stock One-Year % Return Prior to Split | Stock One-Year % Return After Split |
|---|---|---|---|---|
June 16, 1987 | 2-for-1 | $5 billion | 131% | 7% |
June 21, 2000 | 2-for-1 | $18 billion | 140% | (60%) |
Feb. 28, 2005 | 2-for-1 | $37 billion | 275% | 53% |
June 9, 2014 | 7-for-1 | $565 billion | 49% | 36% |
Aug. 28, 2020 | 4-for-1 | $2.1 trillion | 139% | 19% |
Lessons from Apple's stock split history
Apple's history of stock splits shows that the hype leading up to the new shares being doled out to shareholders is greater than the event itself. Apple's share price performance in the year after a split is a bit more of a mixed bag.
However, more important than Apple’s stock splits is the business’s performance. Each time the tech hardware designer has split its stock, it has experienced strong growth in sales and profitability. The exception was in 2000 when sales dipped between the dot-com bust and the release of the iPod in 2002.
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The lesson: Companies such as Apple split their stocks for good reasons, which include managing stock-based compensation for employees, as well as share repurchase programs to return excess cash to shareholders. However exciting stock splits may seem, the real reason to buy and hold a stock like Apple long term is because of secular growth trends that benefit the company.
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