Stock Split Fever for Apple and Tesla Could Be a Warning Sign
Apple (NASDAQ: AAPL) and Tesla (NASDAQ: TSLA) have taken the investing world by storm in recent weeks.
These companies haven't unveiled a groundbreaking product, made a major acquisition, or entered a new market. Instead, they've merely announced that they're splitting their stocks, and on Monday, both stocks jumped after their respective splits were completed. Tesla, whose shares split 5-for-1, surged 12.6%, adding more than $50 billion to its market cap, while Apple gained 3.4% after splitting its shares four ways, tacking on more than $70 billion in market value.
Monday's gains culminated a remarkable rally set off by a frenzy ahead of the stock splits. While splits don't add to the value of the stock, they increase the availability of shares by lowering the price, making them more accessible to retail investors, and indicate that management expects the share price to continue to rise. Though they are generally perceived as a bullish signal, they don't change any of the fundamentals of the company or the value of the shares. Generally, splits don't elicit much of a response from investors, but at times they can spark rallies of their own.
Source Fool.com
