I've read this entire thread once, then scanned it a second time for the word, "splits" - as of 124 comments, nobody has suggested a rational reason as to why Apple would split their stock. There were two implications of splitting the stock, one was that options plays (which normally trade in groups of 100, though some more expensive "minis" are also available) become more inexpensive, and some hand waving about "more people can afford the stock, therefore more demand, therefore greater impact on the price" - which I've heard for 20 years, and I believe has been fully debunked (the counter argument is that if the underlying stock has an actual value, and greater availability pushes stock above that value, then rational people can profit by shorting the stock/selling it until it reflects the actual value)
I'm always confused when an otherwise sane company starts playing with this type of financial engineering, the only people who really seem to profit will be the team who manages the split - and I often wonder whether a split is just some way of rewarding them with business, in return for some type of off books advantage.
Is there any other rational reason why a company might want to split? Does it give them some way of controlling their shares more effectively by splitting them -I.E. When the stock splits, do they get an enumeration of their shareholders that they might not otherwise have?
Anybody been involved in a stock split that can explain what the behind the scenes reasons totally not related to the "stock is cheaper so more people can buy it" excuse is?"
I'm anything but expert, but here's a set of thoughts:
Consider the opposite extreme, Berkshire-Hathaway, where the stock is deliberately not split in order to attract only those investors with, today, $191,000 to spend on a single share. The argument in favor of such a strategy is to attract only investors who are likely to take a long view of things. It may also discourage selling, as it can't be done piecemeal.
(Yes, Berkshire has a substantial number of Class B shares with diminished voting power that trade in the $100 range after splits, but the company was cajoled by circumstances into issuing them; people were beginning to develop Berkshire-tracking funds.)
If you want your company to be accessible to the little guy, and your company's doing well, you'll have to split sometime. Furthermore, if you're a shareholder and you're interested in shorter-term trading, you might cajole your company into splitting.
Why would you care if your company was accessible to the little guy? Those stocks are sold - you never get more money from them unless you issue new stocks, no matter how they are traded in the future. (Stocks seem like a pretty bad deal for the company anyway: get funded via IPO, be forever beholden.)
In fact, they're a liability. So what benefit to a company from increasing the number of people you have to answer to?
If your stock is accessible to more people, there's higher demand, which should drive up the price, benefiting those who hold the stock (and make the decision to split).
"If your stock is accessible to more people, there's higher demand" - this the answer 90% of the time, but I don't believe there has ever been a study (and I've read three or four) that suggests there is any evidence this is true.
To make what I consider to be a not unreasonable comparison, "The standard gold bar held as gold reserves by central banks and traded among bullion dealers is the 400-troy-ounce (12.4 kg or 438.9 ounces) Good Delivery gold bar." [1] - that gold bar currently sells for $41,260 [2] * 12.4 or $511,624/bar. There does not seem to be any difference, per ounce, in price between a one ounce nugget and a 438.9 ounce unit (indeed, there seems to be some transaction costs that imply the larger bar is less expensive per ounce)
For a mature company that is throwing off lots of profit and cash , there are a lot of investors who are analyzing the Discounted Cash Flow of that company, and paying for the stock based on that number. Apple, for better or worse, has entered that realm. Therefore, if they trade significantly below their cash-flow value, those investors will buy up the stock, if they trade significantly above it, those investors will sell the stock (or short it if things get too far out of whack) - It doesn't matter if the stock is selling for $100, $1000, or $10,000/share.
But, the people who run Apple have access to the best advice that money can buy, and they have made this decision - what I'm interested in, ideally from someone who has worked behind the scenes in this kind of really-big-company stock split, is the real reason why this is done. I have a theory it's a mechanism to reward bankers with a lot of business with useless make-work, in return for getting positive ratings moving forward - but I'm open to other theories.
[Edit - another Theory is that Tim Cook and/or his CFO Peter Oppenheimer are just fed up with being asked about a stock split, and given that the stock split is an absolutely meaningless event, that has no negative/positive impact on the company value, but will eliminate the ongoing nagging of people about it, just decided to eliminate that annoyance. My counter argument to that would be is by giving people something meaningless to complain or ask about, you distract them from other things that you would prefer they not spend so much time on - so it's good to leave a few of these around as decoys.]
We can't really get into Tim Cook's mind or his advisors' but whatever their motivation is, it's not guaranteed it's very rational or scientific.
As you note, what matters for a company's valuation is the discounted (present) value of all their future cash flow (+ their book value). Unfortunately no one knows what that number is because no one knows what the future cash flow for AAPL will be. People know the history, the reported numbers, and they make guesses about what the future value of the company will be. There aren't many business where you can predict with any degree of accuracy into the future and Apple specifically, unlike someone like Coca-Cola, isn't in a very predictable market.
Even if you could predict AAPL future cash flows very accurately you would also need to predict future interest rates to be able to set a multiple on those cash flows to esablish a valuation.
To conclude, just because a lot of investors are "betting" on AAPL doesn't necessarily mean that its share price is a better estimate of its true value. If the market collapses tomorrow AAPL is going to fall just as quickly as the other large and small stocks. No one is going to care what those analysts predict the future cash flow will be. What is true is that it is a lot harder for people to manipulate the share price compared to smaller cap stocks with smaller volumes.
I don't think the analogy to gold is strong, mainly because any holder of 400 oz t gold bars can freely convert them to smaller units, the old-fashioned way. You can't do that to a BH share certificate, or at least it doesn't work as well. ;)
While it's not a 100% analogy, it's 99.99% - Good Delivery gold bar are virtually never converted to smaller units. Indeed, it's rare that they are ever even moved from their vault (though that does happen on occasion).
The point I was trying to make is not that Gold Bars are impossible to make smaller, but that their very high price "per unit" doesn't result in any lower-prices per ounce than if they were broken down into smaller units. I.E. There is no pressure to reduce the size of Good Delivery Gold Bar's - the market realizes that just because they are expensive per unit, it doesn't reduce their price per ounce.
In the case of Apple, anybody who is investing in stock, should be able to afford $500. I can understand the desire for tracking funds/BRK-B, when it comes to $150K+ shares on the part of an investor, who may not have $150K laying around to buy "a" share. In this scenario, there was a very real risk that third-parties would start buying up Berkshire Shares, and get voting privileges, while reselling the tracking stock. I think this is an issue for stocks once they get north of $10K (though, it's already an issue with other index tracking stocks - it just gets a little accelerated when the index consists of only one ticker)
One other consideration is that, at its current price, Apple is not able to be considered for inclusion in the DJIA since that index is price-weighted and Apple would account for a huge portion of the index.
After the 7-1 split, Apple will be a likely candidate.
Yes -how insane is that. When I first heard of it, I was almost certain that the person was wrong - but 5 minutes on wikipedia proved they were correct.
But, once again - if the automated purchasing for the stock drives the value up too high, then people will make money selling it - I don't buy into the "inclusion in the indexes drives up long term valuation of a company" - would be interested if anybody has a study that shows otherwise.
The most interesting example is Royal Dutch vs. Shell Transport. Both companies had equal shares in Shell Oil - Shell Transport was in the S&P 500, Royal Dutch was not, and sold for much less, despite having identical economic interests - until they finally merged in 2005.
When Yahoo was added to the S&P 500, its price jumped 24%.
The name for this anomaly is usually called the "index effect", and whether it affects valuation is controversial.
I can't speak for Mr. Cook, but I wished to myself "please split AAPL" just the other day.
I hold AAPL and I would like to let my dividends roll over via a DRIP managed by my broker. But at current prices, yield, and dividend frequency ($525, 2.3%, quarterly) I would need to hold $90k of AAPL for a dividend payment to buy a single share -- a bit rich for me. But after the split, that number goes down to $13k.
Hopefully your AAPL is in a non-taxable account. Otherwise you are setting yourself up for this [1]:
If all this seems complicated -- it is. A lifetime
of DRIP investing may create a morass of tax
obligations when the time comes to sell the DRIP
shares, with at least four new cost bases of DRIP
shares established each year (when dividends are
reinvested) as well as when any OCPs are made.
The first time I saw my accountant he literally shook my hand when I told him I didn't do DRIP.
Does your broker allow fractional shares in your DRIP? I hold a couple shares of AAPL in a Vanguard brokerage account and haven't had any problems reinvesting dividends for fractional shares.
It's just about the psychology of price. People are influenced by the share price. A share price of under a dollar seems cheap and a share price of 500 dollars seems expensive regardless of the actual market cap.
It's just like the psychology of Daylight Savings time -- even though people could get up an hour early in the summer, they won't unless the clock tells them it is time to get up.
DST actually causes more problems than it solves. It would be more beneficial to eliminate DST entirely, simplify time zones dramatically, and just let people do what they want with their time.
DST is meant to solve the problem of 'sun comes up earlier', but all it accomplishes nowadays is to ensure that you get to work closer to the same amount of time after the sun comes up, which makes no real sense. In effect, it shortens mornings because you just end up stuck at work faster.
As a surfer, I get up 1h15m before sunrise regardless due to winds. I'd be getting up at 4:00 am tomorrow without DST. This sounds awesome until you realize I'd have to go to bed at 9, and most people are still up at 9.
It keeps the outdoors set (including construction, aviation, farming and landscaping) in sync with the indoors crowd.
But, if that's the case, then people who are not dealing in pop-psychology, but instead in cold-hearted company assessment would stand to make a lot of money, and, in doing so, would quickly drive the value of AAPL to it's correct number.
If the markets were efficient or in any way a true reflection of value that might be the case. In reality this sort of change can impact the percived value as can a lot of other noise people react to every day. As they say, in the short term the market is a beauty contest, maybe the act of splitting makes the company looks cooler, proactive, smart. Who knows.
Whenever people are concerned there's no such thing as cold-hearted assessment. The only trading entities that are cold hearted are algorithms.
I absolutely agree with you that there are a lot of people who will purchase the stock out of emotion just because the stock now seems more "affordable" - but I'm saying those people who enter the market and play on emotion and "gut feel", will be absolutely destroyed by the professionals who have vast amounts of information and insight into what the long term price of these stocks will be. Those "professionals" may blow the occasional call, but, in the long term, over hundreds/thousands of stocks - they will move the market to the the long term "weighing device" valuation.
So, yes, if Apple were looking for a short term bump in AAPL, perhaps a stock split might, just might be the right play - but, for long term valuation, I am struggling to understand why a stock split has any merit whatsoever.
I used to work for a pre-IPO startup that had experienced a pretty big run-up in their stock price. As a result, their new hires were getting options to buy 200 shares at $100 per share. (I made up those numbers, but you get the idea.) They did a big stock split partly to change the numbers in stock option offers. Apparently it was much more enticing to offer candidates options for 2000 shares at $10 per share. Even though the options would have the same total value, they believed candidates would respond much better to an offer of "more options."
That's a very interesting and insightful angle - If Apple is handing out $50,000 worth of RSUs to new hires vested over 4 years, then currently new hires get 100 shares. While, in theory, a new employee should be fine with 100 shares or 700 shares, human emotion being what it is...
Though -on the flip side - I'm wondering if an employee of any merit has decided not to work for Apple because they got "100 $500 shares" instead of "700 $71 shares"
According to Bloomberg [1], this removes an obstacle for Apple's inclusion in the Dow Jones Industrial Average. The index weights stocks solely by their share price. Splitting up AAPL 7:1 should produce a new share price of around $75, close to the DJI mean of $85.
Anyone have any more information than I do about the AAPL vs. GOOG question?
For quite a while, AAPL and GOOG traded blows in the mid-hundreds range and both generally rallied 2000-2008. As of right now, they're still quite competitive.
Would the stock split be an attempt by AAPL to avoid the comparison?
GOOG split in early April to create a third class of shares (Class C) that allows the founders to maintain control the company through their shares (Class B) for the foreseeable future. They had issued so many Class A shares, their 10:1 voting rights were becoming diminished.
I have not been involved behind the scenes. I'll point out liquidity seems like a likely advantage of splitting shares. You can do smaller trades with a wider audience/more frequently. The added liquidity would also make the shares more valuable to certain classes of traders which may raise the price.
Liquidity would possibly be an issues with BRK-A, where 149 shares traded today (though I could make arguments as to why not) - but, AAPL traded 14mm+ shares today. I don't think you would have any problem finding someone to buy your shares at a reasonable spread within seconds. So, I don't buy liquidity as an issue in this situation.
> Apple will hit up the debt markets for more dollars, it being cheaper to use other’s domestic cash than its foreign reserves
Can anyone explain why this is so? Because they are somehow getting a higher interest rate return on their reserves then they'd have to pay to borrow? (That would seem pretty impossible). Because they'd have to pay taxes if they use the foreign reserves? Something else?
> Because they'd have to pay taxes if they use the foreign reserves?
Yep.
Apple can borrow at somewhere near 2.3%[1] on the public debt markets. They have billions overseas, but if they bring it back to the US, they'd have to pay corporate income tax on it (35%).
They're just biding their time until the Chamber of Commerce lobbyists gain enough influence to get congress to pass an overseas tax holiday to repatriate the money at 15% or 20%. To this end, expect a huge PR onslaught near election time about how much economic stimulus would be provided if we changed the rules about taxes just this once (note: happens every ~10 years).
The arguement for the holiday the last time was "job creation" which didnt really bear fruit. Dont think it will happen again unless it is part of a larger tax reform bill.
The politically viable argument is that it will create jobs, and is indeed false.
The serious, economic argument is that companies shouldn't have to keep profits abroad simply because of a screwy, distortive tax system at the international level. And it is a valid concern.
(Before anyone says it, yes, I'm aware that some taxes, by design, distort behavior in a socially desirable direction. Differential corporate taxes at the international level ain't one of them.)
It's not so much about the level of taxes as it is about taxing foreign income, which is not something that other countries do, giving a competitive disadvantage to the US.
Even if Apple brings back the cash and dividends it out, that's more money in the pockets of shareholders, which are pretty much everybody with an index fund, pension funds, mutual funds, etc. That can't hurt the US compared to leaving the cash abroad.
Many other countries tax overseas profits, and many of the ones who don't, have very strict rules about foreign ownership to assure they aren't being gamed. The G20 is fairly united on this front.
The best argument for the holiday, is the fact that we're one of the only major nations doing something so foolish as double taxing foreign profits.
The idea of eg paying China's corporate income tax, and then paying America's on the way home, is absurd to say the least. A lot of companies will be stuck with 45% to 60% income tax bills on foreign profit. I can think of few things to make America less competitive overseas.
That's patently wrong. Corporation-level double taxation only applies in the extremely rare instances where the US does not have an income tax treaty with the other country.
We have tax treaties with all nations worth doing business with. Nobody is going to pay China's corporate income tax then U.S. income tax again at the corporate level for a 45-60% bill before it even gets to the shareholders.
My spider sense is tingling - from an ignorant observer on the subject of corporate taxes, this seems wrong.
As someone who isn't 100% ignorant about taxes in general, I've noticed that there's a shitload of completely wrong information about taxes out there. It's amazing how many smart people are incredibly ignorant, and then spread that ignorance, about how taxes actually work. So I have to ask:
Is this how it really works? At least for personal investments, IIRC you get some sort of foreign tax credit. From my initial searching, it seems like there's something similar for corporations.
The whole idea of 'double-taxation' is a canard. That's another topic though.
> Is this how it really works? At least for personal investments, IIRC you get some sort of foreign tax credit.
Any money Apple pays to foreign governments as income tax on profits is included in the calculation of their domestic tax liability. So if Apple had $1B in overseas profits, paid 5% in Ireland as income tax, then wanted to repatriate the remainder to the US, the government would seek $300M in tax -- not the $350M that would be indicated by our 35% corporate income tax rate.
People trotting out the 'double-taxation' nonsense are promoting the idea that Apple should be able to venue-shop for an ultra-low-tax locale to claim their profits, then be free-and-clear of their US obligations.
Two more things worth mentioning:
1. The 'overseas' money typically isn't physically overseas. The money is in US banks, circulating as loans in the US economy, but is only overseas on an accounting ledger for tax purposes. This greatly blunts the potential impact of tax holidays.
2. If Apple takes out debt to fund operations purely to avoid repatriating money, the US taxpayer would then be subsidizing Apple even further. Interest on debt is a deductible expense, so that 2.5% per year Apple is paying, would be deducted from their income in the next tax year.
> So if Apple had $1B in overseas profits, paid 5% in Ireland as income tax, then wanted to repatriate the remainder to the US, the government would seek $30B in tax -- not the $35B that would be indicated by our 35% corporate income tax rate.
That's not what double taxation is. Double taxation is that both corporate income and corporate dividends are taxed. Suppose a corporation makes $10/share in profit and wants to issue it as a dividend. First they would pay corporate 35% income tax on the profit and be left with $6.50/share, then if they issued a $6.50/share dividend, the shareholders would have to pay income tax on it again and be left with only $4.225 of the original $10.
If a foreign government also extracted a cut then the money would be taxed thrice.
This is an even sillier definition of double taxation than I was giving you credit for.
Dollars don't pay taxes, taxable entities do.
A corporation is a separate legal entity that serves as the tax base. If it makes an income, it will pay a tax on that income.
An individual is also a separate legal entity that serves as a tax base. If a corporation pays an individual dividends, then the individual will pay tax on the capital gains from their investment.
How is this any different than when a company pays you an income. First, the Federal government taxes you, then the State government does, then come Payroll taxes, then any local taxes, then you have to pay property tax, then you have to pay sales tax. Each dollar is quintuple-taxed! Or more!
> "Would you rather pay 10% income tax twice a year, or 50% income tax once a year?"
But that obviously misses the point. The problem with double taxation is that it makes the rate misleading. If you've lost 35% to corporate income tax and then 15% to qualified dividends or capital gains tax, you're paying ~45% in total, but people point to the 15% rate and trot out the "pays lower tax rate than secretary" trope.
> How is this any different than when a company pays you an income. First, the Federal government taxes you, then the State government does, then come Payroll taxes, then any local taxes, then you have to pay property tax, then you have to pay sales tax. Each dollar is quintuple-taxed! Or more!
Those are all different taxes. Income tax is the same tax paid on the same money, twice. It's recursive. Compare how corporate income tax works to how sales tax works. If you're a business you don't pay sales tax on your raw materials, you only collect it once on the finished product. The total amount of sales tax paid on a car doesn't increase just because you increase the number of intermediary entities between the iron mine and the car dealership. With corporate income tax, it does.
That's not the crux of his argument whatsoever, it's just a random statement being held up as a straw man.
> Income tax is the same tax paid on the same money, twice.
Except it's capital gains, intentionally taxed at a lower rate than income. The first tax is levied on corporate income, the second tax is capital gains which is taxed on the individual level. Different tax bases necessitate different tax treatment.
> Compare how corporate income tax works to how sales tax works. If you're a business you don't pay sales tax on your raw materials, you only collect it once on the finished product.
That's only true in the US. The majority of G20 countries that don't have capital gains + corporate income tax use a VAT to achieve the same ends.
Look at effective tax rates for individuals and corporations based in the US. We're one if the lowest taxed countries in the 1st world.
> That's not the crux of his argument whatsoever, it's just a random statement being held up as a straw man.
Let me rephrase: The quoted statement is the closest thing he comes to as an argument on point. The rest of it is falsities and random talking points with no relation to the question.
> Except it's capital gains, intentionally taxed at a lower rate than income.
It's taxed at a lower rate because it's double taxation. It's the political middle ground between not having double taxation and having it at the full ordinary income rate.
> The first tax is levied on corporate income, the second tax is capital gains which is taxed on the individual level.
They're the same tax. It's all income tax.
Consider what happens when both entities are corporations. When Ford makes income, they pay income tax on it. If the income was from selling cars they would have paid the ordinary income rate. If it was because Ford owns shares of Exxon and Exxon issued a dividend, it would be the dividend rate. In either case, when Ford issues what's left over after paying its income taxes as a dividend, its shareholders have to pay income taxes on it again. And it's the same tax (again) whether the shares in Ford are owned by Henry Ford or Apple, Inc.
> That's only true in the US. The majority of G20 countries that don't have capital gains + corporate income tax use a VAT to achieve the same ends.
VAT and sales tax are economically equivalent, VAT is just collected at different points in the supply chain (which makes tax evasion more difficult). VAT is only collected on the increase in value over the cost of the raw materials (the "value added"), i.e. the portion of the sale price that hasn't already been taxed.
> Look at effective tax rates for individuals and corporations based in the US. We're one if the lowest taxed countries in the 1st world.
What does that have anything to do with double taxation?
Note also that the reason effective tax rates in the US are so low is the massive amount of tax avoidance that occurs. The nominal rates that US corporations would pay if they didn't all hold their profits in foreign subsidiaries are some of the highest in the world -- which is highly discriminatory against smaller non-international US corporations that can't play the same tricks.
The corporate dividend tax paid by individuals tops out at 20% today, so the example total should be $5.20. States usually tax both corporate profits and dividends at 5-10% also, so that's another 10-20% but that's usually deductible against the other taxes. Expect to keep about $4.30 from the $10 profit, if it's distributed as dividends.
The 20% rate only applies to qualified dividends. If you don't meet the qualifications (e.g. you don't satisfy the holding period requirements) the dividends are taxed at the higher ordinary income rate.
The corporate foreign tax credit is even more generous than the FTC available to individuals. They get credit for taxes paid on the dividends (i.e., withholding taxes) and in some cases for the foreign taxes the dividend-paying company paid on its income.
A lot of this money have been funelled through tax havens and have never been taxed at all. There is no need to feel sorry for Apple and Google. They are abusing the tax system far more than they are hindered by it.
"As is often the case in Washington, the scandal isn’t what’s illegal -- it’s what’s legal, in this instance tax- avoidance systems with names like the Double Irish and the Dutch Sandwich. As detailed in a Bloomberg Businessweek investigative story last May, Forest Laboratories Inc. (FRX), which makes the antidepressant Lexapro, sells almost 100 percent of its drugs in the U.S. and cuts its U.S. taxes dramatically by attributing the bulk of profits to a law office in Bermuda.
Similarly, Google reduced its income taxes by $3.1 billion over three years by shifting income to Ireland, then the Netherlands, and ultimately to Bermuda. Microsoft has used a similar arrangement. Records in the Cayman Islands and Ireland show that Facebook is setting up such a structure too. "
> I can think of few things to make America less competitive overseas.
How about double taxing American salaries overseas? E.g. if I visit the states on business, I have to pay US taxes AND Chinese taxes for any time I spend there (neither recognizes the other's jurisdiction in that case). That is about a 60% tax rate, and you can't even deduct the taxes you paid to either country from the other.
A cynic would say that if politicians want the tax holiday to appease their campaign donors, it doesn't have to /actually/ create jobs, voters just have to /believe/ it creates jobs.
tl;dr: Microsoft had beaucoup bucks stashed in the EU that they didn't want to bring back to the US due to our corporate taxes, so they put it to use by buying Skype.
Also, keep in mind that not every corporation is in such an enviable position as is Apple.
You got a lot of replies talking about the global taxation of US companies' profits. That is a problem; no other developed nation tries to tax foreign profits already taxed once again at home because it leads to just this kind of problem.
But the really big problem is that the US has the developed world's highest corporate tax rates. At 35% federal and 0-14% state, US rates exceed all other first world jurisdictions. Few big corporations pay that much because the USA has a lot of special credits and deductions that lobbyists for big companies have slipped into the code for themselves, like executive entertainment expenses and "research" or "domestic" manufacturing and oilfield operations and banking interest and such. Foreign profits don't enjoy such deductions at the margin, so the full rate would have to be paid.
President Obama and congressional Republicans have suggested that the rate be lowered and some of the deductions be eliminated. Congressional Democrats and special interests that each want to keep their own favorite deduction have been preventing a deal for years.
It's more likely that we'll just get a overseas tax holiday at 20% or so sometime in the next decade while the system at home remains a mess. Apple can wait it out and see.
> no other developed nation tries to tax foreign profits already taxed once again at home
That statement is demonstrably false. I know for a fact that in Australia foreign income is taxed again. Credits are available for some or all of the tax paid in the foreign country depending on the existence and nature of bilateral tax treaties between the two nations. I believe similar schemes operate in most developed nations.
Also of note is that the company tax rate in Australia is 30% but with far fewer special credits and discounts so the effective rate is quite close to the nominal rate.
> Because they'd have to pay taxes if they use the foreign reserves?
This is the main reason.
> Because they are somehow getting a higher interest rate return on their reserves then they'd have to pay to borrow? (That would seem pretty impossible).
This is also a possibility. Apple has extraordinarily good credit. They can consequently borrow at near-zero interest rates. They can then invest that amount of money in some (perhaps only slightly) higher risk security than their own bonds and turn a profit -- and if the money was originally held by a foreign subsidiary then so is the profit from the investment.
I believe it to be the taxes. If they repatriate those dollars they'll pay a significant tax. I believe there are also bills in congress that may someday make it through to address this, but it probably won't be soon. Getting to not pay tax on foreign profits is just bad policy, imho.
It's mainly a tax thing: to bring the offshore cash to the US, which it would have to do, it would have to pay income tax on it. The combination of deferring this tax and the reduced dividend payout which come from buying back their stock more than pays for the interest on the debt.
Maybe the proper framing is that Apple (through Braeburn Capital) hid this money in offshore tax shelters much like Google and pretty much any other large corporation does.
Bringing it back simply allows Tax authorities to "see" it again.
Perhaps the fact that it's even possible for companies to shelter the vast bulk of their earnings from tax is the problem in the first place?
It's perversely amusing to me that while an indiviual US citizen's overseas earnings are fair game for the IRS (and AFAIK no other country does this to their citizens), a corporation's earnings are totally invisible.
The reason is because these companies have children who are native citizens of the other country, which the parent company has full control over. They give the children some asset (e.g. intellectual property) and pay them an allowance (e.g. license fees for the IP).
The IRS can't touch that money any more than they can touch the money of your Jamaican love-child.
Actually that says China taxes residents on worldwide income, and non-residents on China-sourced income. The US taxes non-resident citizens on worldwide income.
China has a significantly broader definition of residence than does the U.S. A Chinese resident company includes companies incorporated in China as well as companies managed from China; Chinese citizens are taxed on their worldwide income for several years after they leave China, possibly indefinitely if they maintain their household, familial, or economic connections to China. In practice, this means that China effectively imposes worldwide taxation on its companies and citizens.
In the U.S. residence is a very straightforward. A company is a resident if it is incorporated in the U.S. An individual is a resident if he is a citizen, a greencard holder, or passes a mathematical "substantial presence" test.
Non-resident U.S. citizens are subject to worldwide taxation...but they have a very generous $100k floor, plus foreign tax credits for foreign taxes paid on their income.
China will tax world-wide income for non-citizens if they spend 5 contiguous years in China. I recently had my month out (ok, it was more than a year ago) to avoid this situation.
The $100k floor only applies to work done outside of the US. If you work for an American company, you'll invariably go on business trips back home, which mess up your taxes substantially as this isn't covered on the US/China tax treaty.
> Part of the problem is that the US is unique in taxing world wide income.
It's not taxing world wide income. Apple hasn't paid US taxes on these foreign profits. That's the whole point. They only have to pay taxes on that income if they bring it back in the US.
They're selling the fruits of design and engineering work that happens in the US, and so this is arguably where most of the value creation happens, and that that should be taxed despite the fact that the nominal sale and creation is happening overseas.
Since the foreign countries tax the sales, they (and the earning of all Americans overseas) should not be taxed again to get the money back into the US. It is a BS way to operate and the US is the only country who tries it.
> They're selling the fruits of design and engineering work that happens in the US, and so this is arguably where most of the value creation happens, and that that should be taxed despite the fact that the nominal sale and creation is happening overseas.
There is an easy solution: Tax the corporation's US payroll. The obvious problem with doing that (or any other thing that causes effective tax rates to increase in response to employing US workers) is that it creates a large monetary incentive to move the "value creation" somewhere else.
The whole problem is that we're trying to tax stupid things. Taxing corporate profits is stupid because profits don't have a nexus with any particular jurisdiction, so they get moved to whichever jurisdiction has the lowest taxes. The only way to avoid that is to tax something other than profits -- something that actually exists in your jurisdiction. Payroll tax, consumption tax, etc. And between them, the consumption tax is better because a disincentive to buy things made in other jurisdictions causes less harm to the local economy than a disincentive to hire the people in your jurisdiction would.
Edit: People who downvote comments without providing any reasoning are cowards.
Sort of. Personal income tax (with the exception of half of social security and medicare) is paid by the employee. Some economists say it shouldn't matter whether it's the employee or employer who pays, on the theory that people will contract around it either way. They will sometimes but not always. In practice it creates a psychological advantage for the party not paying the tax during salary negotiations, because the number being negotiated is generally pre-tax. If the taxes subsequently paid are paid by the employee then it gives a perceptual advantage to the employer because the employee will actually receive less than the number agreed upon, and vice versa if the employer pays the tax on top of the salary.
It also changes who is affected by changes in the tax rate for all the employees whose compensation was negotiated before the rate changed. Making the payee of US payroll taxes the employer rather than the employee would similarly be a de facto raise for almost all US workers at the time of implementation because the employer would effectively begin paying your income taxes.
So what I mean is, make the corporation pay it, not the employee. Assuming you actually want a tax on labor at all, given that it discourages hiring in your jurisdiction.
> Personal income tax (with the exception of half of social security and medicare) is paid by the employee.
Sure, but income tax is different than payroll tax, and some payroll taxes (the federal ones that support Social Security and Medicare, particularly) are split between the employee and the employer.
> Making the payee of US payroll taxes the employer rather than the employee would similarly be a de facto raise for almost all US workers at the time of implementation because the employer would effectively begin paying your income taxes.
I think you mean "payer" rather than "payee". The payee of federal income and payroll taxes is the federal government, not either the employee or the employer.
> So what I mean is, make the corporation pay it, not the employee. Assuming you actually want a tax on labor at all, given that it discourages hiring in your jurisdiction.
To the extent the US has a tax on labor qua labor (payroll tax vs. income tax), that's already halfway true (income tax isn't strictly a tax on labor, since its not limited solely to labor income.
All of that is true, but it seems like a pedantic tangent. Are you saying that converting personal and corporate income tax into employer-paid payroll tax would not be more difficult for corporations to avoid paying than existing corporate income tax?
> US gov wants to take something like 35% in taxes of "repatriated" earnings.
You are surprised that the US wants to tax earnings? The US taxes everyone's earnings. If they want to keep it overseas they can avoid the tax. If they want to bring it back they need to pay a tax on the amount minus the credit for the foreign tax already paid. They would have been taxed if they earned the money in the US, so I'm not sure why this is surprising.
Taxes and delays make it easier and faster to get debt than to move a couple billion from, say, France or China, to the US. It's complex, but there's a lot of stuff explaining this in other comments around here. I'm sure someone will do the break down again.
I wonder if there's a lagging indicator of tech bellwether decline in innovation/disruption when they introduce a dividend.
For example, Apple had a dividend in 1995. Then in 1996, Jobs came back and nixed it. Microsoft issued its first dividend in 2003. Cisco in 2011. Oracle in 2009.
As a former ibanker, I should be all for financial engineering. But when companies can do "actual" engineering, I'd prefer to spend money on growth if possible. If not... then, I guess the dividend makes sense, hence my earlier assumption.
When Jobs came back to Apple, Apple was not in solid financial health. That's not a good time to have a dividend.
If they needed to deploy all of their cash for growth, I'm sure they would. The trouble is that they have so much cash that it's likely not clear how to deploy it in a way that is true to Apple (ie they could buy some big companies or add 100 products to their portfolio, but that's not the way they roll)
I'm sure they had a target price in mind (something that would be low enough to attract investment but high enough to not seem cheap) and just split the appropriate amount to get that number.
That's just so... wrong. I know some investors are going off things like that but doesn't it bother anyone that such an important part of finance depends on people looking at numbers in a totally irrational way? Like, simply not even doing the math. Even on investment sites, I've seen people say "it's crazy that foo is at $20 but bar is at $50". It's as dumb as someone saying they prefer Zimbabwe Dollars cause it's easier to become a trillionaire.
When I heard the number in my head it was obvious because I remember the price being 700 (thus 700/7 = 100)
now I checked, and it is currently 500something, but I think their peak was near 700, what I can guess from the real information, and from my "remembered" information (that is kinda important anyway, prices changes tend to be a lot about psychology) I guess that they are aiming for a 100 USD share price in some medium term.
Correct. In theory it doesn't make much of a difference (ie, 20 nickels vs 4 quarters). Investors generally perceive it to be management having a bullish outlook on stock price. And there is a small liquidity benefit (although AAPL already pretty liquid).
Options markets are where this has the most impact. In order to sell a covered call, I need to own at least 100 shares of a stock. A stock priced at $500 or higher (in the case of GOOG) makes it harder for a smaller investor to participate in the options market. Splitting the stock price makes it possible for a little guy to purchase options based on their stock holdings.
Have you traded the minis? I just looked after reading MichaelApproved's comment and the quotes I saw for the minis were way outside the standard contracts.
Well they're not usually "way outside" but yes, they are usually more expensive. Also, most brokers add a per-contract fee so that also adds to your cost basis.
If you're looking right now, it's possibly because AH trading is much more volatile.
Day 0: Company trading for $1/share with 100 outstanding shares -- Market cap = $100. They are offering $0.05/share dividends -- Total dividend = $5
Day 1: Stock split at 5:1
Day 2: Company trading for $0.20/share with 500 outstanding shares -- Market cap = $100. They are offering $0.01/share dividends -- Total dividend = $5
Yes. Basically, a stock split changes nothing about the value of the stock. However, it might lead to a slight rise in the stock price since small investors will now find it easier to buy, and so total demand for the stock might be a bit higher.
This article has a little more information, stating that this quarter's dividend will be exactly $3.29 per share of common stock for all shareholders as of 5/12/2014.
The narcissist in me thinks it will go down further than 1/7th the previous price, because whenever I hear about Apple stock, it's going down. Apple sold 5 million iPhones, stock goes down; Apple announces new product, stock goes down; etc...
A split has absolutely zero impact on the worth of your shares. The primary reason companies do it is to attract investors who are more comfortable paying lower prices for the shares, thus increasing demand and driving a higher price.
Nothing changes except the number of shares you own. The total amount of money you have in AAPL will remain the same. Your dividend check will remain the same (assuming an equal percentage the next time a dividend is announced). You'll own more shares, but each individual share will be worth less (but again, the total worth of your AAPL stake will remain the same).
Will it go up or down? (EDIT: apparently "up" if afterhours is any indication.) Used to be, back in the dotBomb days, a split announcement drove the price up. Now remember from above that nothing has really changed. AAPL's market cap is still the same, there's just more shares out there. One thing that has changed is that Joe Sixpack doesn't need to drop $50K to buy a lot of 100 shares. But Joe doesn't drive the market, institutional investors do. And when Fidelity's mutual fund is buying $10,000,000 worth of AAPL, they don't care if the share price is $1 or $1000. So there isn't much rational reason for the price to go one way or another.
A split could be taken as "management thinks...". I don't know, could have some weight to it, could not. At the end of the day, as someone who has traded stocks for over 15 years and traded AAPL since about 2003 (yea, me! Mostly...), I'm not making any decisions one way or the other on this news. I'll keep an eye on AAPL for sure, though, just in case the market disagrees with me.
Would now be a good time to buy? No, yesterday was a good time to buy (that's okay, I didn't either) because it's up 8% in afterhours. Earnings are tomorrow, and never ever never buy AAPL the day before earnings (it almost always go down the next day). WWDC is coming up, so it could be "AAPL announcement means they'll soon own the $WHATEVER market. Buy!" or it could be "AAPL announcement shows that a post-Jobs Apple is doomed. Doomed!"
No offense, but if you have to have a stock split explained to you then you're probably not suited to trying to time the market on AAPL. Hell, I've been trading AAPL for over ten years, and I'm not suited to trying to time it (I've done it, and mostly come out ahead, but I attribute it to getting lucky and not to my 133t trading skillz). Just hang on to it, see how it shakes out, and if it hits a good price for you at some point, sell it. Or if it takes a dip (say, after earnings maybe?), buy some more. If it opens up 8% tomorrow morning, you might even consider selling what you've got. Then if it dips after earnings, buy some more then.
But I am in no way, shape, or form a financial adviser. My advice isn't even worth what you paid for it. For entertainment purposes only, do not under any circumstances make trades based on what some anonymous dumbass on the internet says, because we're a dime a dozen, and if I were so smart I'd be hiking the Cascades today and not working a day job.
> Would now be a good time to buy? No, yesterday was a good time to buy (that's okay, I didn't either) because it's up 8% in afterhours. Earnings are tomorrow, and never ever never buy AAPL the day before earnings (it almost always go down the next day). WWDC is coming up, so it could be "AAPL announcement means they'll soon own the $WHATEVER market. Buy!" or it could be "AAPL announcement shows that a post-Jobs Apple is doomed. Doomed!"
That's wrong. This announcement came as part of the earnings announcement - it is already out and they did have a great quarter (hence the 8% pop).
To another point, I would expect a slight appreciation from the stock split. Apple is one of the most traded retail stocks and affordability could certainly provide a bump to the stock.
Then you're already ahead of most individual investors in the market. Hubris will lose you more money than anything else. Ask me how I know. :-) (Wishful thinking comes a close second to hubris, though.)
The only reason I can think of is to be listed in the Dow. Being too expensive is the reason it isn't in it yet. $75 is slightly below the current average Dow stock prices of $77, but should it double in price in the future, it still won't be too expensive for the Dow.
As stated elsewhere, it allows small investors to buy in -- and the stock advance of their AppleTV release it could mean that they are expecting a ton of attention from the lay investor.
The dates are significant: The split happens the evening of WWDC launch.
Without weighing in on why AAPL decided to split or whether it was a good idea, I'll say that I'm happy they did it. I make charitable gifts by donating appreciated stock (more tax-efficient than cash), and this split will allow me to make more granular donations than before. I don't always want to make donations in increments of $500.
What's really fun is, you bought a stock a long time ago, it spun off some other companies which got acquired by yet other companies, such that you now own several stocks, all attributable to the purchase of that one stock a long time ago. Now you sell some of the resulting stocks, and you need to compute your basis in order to figure the taxable capital gain or loss. This entails looking up the ratios from the various spin-off / acquisition events to determine how much of the original cost to allocate to the sold shares.
Dollar cost averaging only suits to lower volatility a bit, but has nothing to do with returns. This can help you as much as it can hurt you. If you're plunking down significant cash into a single tech stock then I don't think volatility is your main concern.
You're either the kind of person who has an investment thesis that you're executing on, trying to time the market for optimal returns, or you're the kind of person who should cost average into the stock. Based on the question the GP asked, they're in that second group.
If you make the random walk assumption then DCA doesn't improve expected returns. Those who expect higher returns are (perhaps unknowingly) relying on unjustified cyclic patterns in prices and trying to exploit that inefficiency.
DCA can reduce risk in theory, but only if you consider USD a risk-free asset. If you really want to minimize risk you should buy real estate funds, commodity funds, etc. based on your expected future consumption.
Rather than pay a dividend, wouldn't it be better to take less margin on a low-end iPhone, iPad, or Mac to increase market share? The iPhone, for example, will always have a small global market share because they only sell high-end phones.
A phone that's $50 cheaper would translate in tens of millions of phones sold.
I agree that they can do better than they have in this area, but they are also fundamentally not the type of company that has any ambition to be everything to everyone. In the computer world, they aren't comparable to Toyota or Honda, they're more like BMW or Audi. In mobile, the same holds true to a lesser degree. As a company, there are things they're good at, and things they're not good at. There are things they like to do, and things they don't like to do. If they put too much emphasis on market share, they may get stuck doing things they're bad at so they can accomplish things they don't want to do, at the expense of doing things they want to do, and doing them well.
I don't think I've ever heard anyone make an impassioned argument that BMW absolutely positively must start selling millions of zero-margin $10k subcompact hatchbacks to better compete with Toyota/Honda/etc., or else they're going to die. BMW might do something like this, but it would be because it's a segment of the market they want to get into for whatever reason, not because they feel like they have to. Yet, people make these arguments about tech companies and market share all the time.
I've explained it a few times already. The apps add the extra value to the phone. If another mobile OS has better apps, it will gain the edge. This will become particularly important as mobile converges with the desktop.
That's all true, I just don't think it's as huge a factor as a lot of people think it is. If one OS market share is so small that the result is very, very few good apps being written for it, and many big-name apps are not available for it (like Twitter or Facebook or Candy Crush or whatever), that's a big problem. But up until that point, it doesn't really matter.
For example, IMO Windows Phone has a much smaller app store than iOS or Android, but it's big enough that the size of the app store is probably not going to be the #1 factor (or even in the top 5) when someone is deciding what kind of phone to get.
Consumers might say "I don't want Windows Phone because Windows Phone isn't appealing to me", but it's probably past the point where very many people would say, "I really like Windows Phone but won't get one because there aren't enough apps." Point being, Windows Phone is a very distant third behind Android and iOS in terms of market share. It's in the low single digits in market share, but that's still enough to get over the adequate-app-store hump (IMO at least).
So, I'm not denying that market share is essential to drawing developers, I just don't know if the market share extremes are ever going to get big enough to have an impact on iOS vs. Android.
My main objection is when people (and I'm not accusing you of this) slip into there-can-only-be-one-ishness, where there is an implicit notion that the market being discussed is a natural monopoly, and that the ultimate outcome is inevitably a market share horse race that leaves only one company standing. The argument is always that whoever has the most market share gets more apps, and whoever gets more apps gets more market share, resulting in a natural tendency towards a last man standing situation.
This was such a huge theme in the '90s in the computer industry- so many people just assumed that market share alone would cause Windows to completely take over to a much greater degree than it has. Mac OS would just vanish, and Linux would turn out to be just a fad amongst CS undergrads. Of course, Microsoft still has a monopoly, in the sense that it has 90%+ market share pretty much any way you look at it, but that's a lot different than 100.0% market share that people were predicting it would have. That leaves plenty of room for OS X and Linux and others to find their niche, and those niches are frequently more profitable and/or interesting than the mass market that Microsoft has covered so thoroughly. I wouldn't be surprised if the mobile world shook out in a similar way, long-term.
Of course market share mattered in the 90's. It was a huge problem for the Mac and Linux (and all those operating systems that died). They found niches but Photoshop and most other software , for example, was never ported to Linux because it never had enough market share to port to it. Photoshop was originally a Mac only app but the dominance of Windows meant that it needed to be ported.
Apple doesn't want to sell the most amount of phones, the leave that to Android. What Apple wants is to make the most amount of money off of phone sales. I'm sure they've looked at different price levels and determined that a 10% lower price would not increase units sold by more than 10% ( or more accurately 11.11%.)
Yes, I know. My point is that if they're just going to give the money back in dividends, maybe they're better off trying to gain market share. At some point, having a global market share of 20% means that a lot of software will be written for the other platform first. More eyes means more ad revenue.
Not just 20% market share, the top 20% most engaged, most spending mobile users. Out of a market very soon to be 6-7 billion strong. They may not always be the best market, but I'll try to serve them first every time.
800 million credit carded users today. More iPhones sold in a quarter than yearly global PC sales in the mid 1990s. That is big enough for a lot of things.
Once again, I understand the "we sell BMW's" attitude. What I want you to understand is that the shear volume of Android will make it the major software platform, much like Windows is the major software platform, and the Mac is often treated like a second class citizen.
I do understand Android as significantly larger, but the users are significantly worse. While there are still sub-markets that are decent, most Android users don't spend much money and don't use their devices anywhere nearly as much as iOS users. Nor do they tend to care as much for quality over price. I want customers that really really want my solution, not just the cheapest solution.
Apple can be seen as a sort of "BMW" when looking at their USP, but it's not really like that at all. Can I make Apps that run on BMWs? It's not a very good analogy of the platform aspect of iOS.
I feel it's a question of where I want my product; on a "Walmart" shelf or a "Nordstrom" shelf?
I'd also contend that Android cannot be seen as one platform. At the very least it's bifurcated into "Samsung-Android" and "Everyone-Else-Android".
Every complaint I've seen against the 5c was that it looked unprofessional, was too colorful, or looked cheap.
People didn't buy the 5s over the 5c because it was expensive or offered more features or power. They bought it because it was the only option that looked like a phone and didn't attempt to call attention to itself as a fashion statement.
Apple banked on the lower price offering requiring further differentiation and uniqueness to sell well. In fact, it requires less differentiation and more generic appeal to be acceptable to the larger market.
They designed themselves into a tight niche, instead of opening themselves to a real market. Big mistake.
This is a common mistake. The 5C was not lower priced, that was a pre-announcement rumor that turned out to be incorrect. The 5C was lower costing to make. It was intentionally made to "look cheaper" because they didn't want to offer the 5 as the 2nd phone they felt not enough people would buy the high end 5S. Now they sold fewer 5C's than they would have if they used the 5 but more 5S's and made more money because of the cheaper parts for the 5C.
> larger market.., instead of opening themselves to a real market. Big mistake.
Last I checked Apple makes more than half of the industry profits. I'm sure they would shocked to learn that they have missed the "real market"
This is the first time I read this point of view. I don’t think it is as widely shared as you believe. Every complaint I read about the 5C is that it is not cheap enough.
> In the year-ago quarter, Apple accounted for 77.8% of the mobile phone industry's earnings before interest and taxes. In the fourth quarter of 2013, that figure grew to 87.4%
Dividend amount is usually based on extra cash generated by a company. However, lower margin does not directly translate to less cash generated by the company.
I rather sell one watch at $10000 than a thousand watches at $10. Simply put, less customer care and the only customer I care for is probably a king or a president.
Nope. It's only a sure bet if these products will beat expectations, and using your comment as an example, I think it's hard to imagine that expectations are not high.
Do they save money on dividends if they have more shares because of rounding?
eg: let's say they have 100M shares and will pay US$ 2.15 per share. That's US$ 215M dollars paid.
Now they do a split and those 100M shares become 700M, dividend prices also are divided by 7 and become US$ 0.3071428571 per share, then they decide to round down to 30 cents per share.
It means they paid the same dividend as before but the total spent was US$ 210M
In other words they paid the same amount as before but rounding it down they saved 5M dollars or 2.3% of the money they could have spent otherwise.
If so this could also explain why 7. Since it's a prime number there are more chances that the division won't be round.
Isn't the goal of Apple's huge piles of cash to finance & consolidate their manufacturing as well as distribution? Could we interpret this as a signal that there aren't any new products coming down the line that would require such expenditures?
By new products I mean the release of a totally new line (e.g. iPhone 1) rather then an iteration upon a current line (e.g. iPad mini).
You can interpret this as a signal that Apple has a lot of cash, and they make a lot of cash. CapEx and R&D have been steadily rising these past few years and Tim Cook has explicitly said new products would be released in 2014.
It is one of the goals, and they are still actively investing in that area, for example the sapphire plant they recently invested/built. However given how much cash they have ($150bil+), spending all of that on operation and manufacturing in a short amount of time is actually infeasible. A state of the art chip fabrication plant would only run you around $2bil these days, even if you build it in an expensive country like the U.S (kinda tells you how over-valued WhatsApp was huh), so even if Apple decides to build 20 of such plants (Intel only has around 10, and a lot of them are older ones)), they STILL have over $100 billion in CASH that they don't need, which is still more than any other tech companies' cash reserve.
How is a company like Amazon able to constantly funnel cash back into their company while Apple's reserves just grow? Do you think it's the nature of the business (small margins for Amazon, giant for Apple) or different company priorities?
Profit margin sure is a big difference, and also Apple makes more profit in one quarter than Amazon has EVER made in its entire company's history. Amazon is in the retail business, and it's razor thin profit margin when compare to traditional tech.
Apple simply CANNOT funnel that much cash back into the company, unless you consider paying absurd amount of money buying over-priced social networks a smart investment.
Amazon and Apple are very different companies. Apple designs, manufactures (well, mostly contracts out manufacturing), and sells a relatively small number of relatively high margin products that they sell boatloads of. (And, like Amazon, they have some cloud services but at Apple's scale these are a pretty small piece.)
Amazon on the other hand continues to build out enormous infrastructure both for Amazon Web Services and Amazon.com. AWS is also in something of a price was with Google right now with various headlines today somewhat hyperbolically predicting that cloud services were headed towards essentially free. That said, Amazon is arguably building a huge (and costly) moat around its business.
They're both impressive companies. But Apple's business requires a whole lot less reinvestment relative to revenue both now or in any near- to mid-term foreseeable future.
Nature of the business. Amazon is a growing company and invests heavily in itself to stay relevant, to grow, to achieve long-term success in a very competitive environment. Amazon's customers care mainly about price. Apple has been successful in high-quality innovation and has created a remarkably valuable brand. Apple's customers care mainly about quality and are willing to pay a high price for it. Also, geographies: Apple has achieved far greater economies of scale than Amazon, and Apple will continue to enjoy the benefits of global scale combined with high margins so long as its products stay ahead of the competition.
The stock is up 36 points or 7% in after-hours. I would be short. These moves from management reek of desperation and don't give me much confidence. They missed big on ipad sales
Some companies certainly split their stocks to encourage demand, but I don't think any do it for "desperation." As for Apple, they've proven time after time they don't really care about short-term expectations.
I'm close to piling on the anti-Tim Cook bandwagon. Everything he does seems to have no relation to product (buybacks, splits, dividends, environment, supply chain cleansing, repatriation taxes, etc.).
That's more of a combination of what the press is writing about, plus the fact that he's much more open and forthcoming about that stuff than his predecessor, than it is an actual observation about what he's spending his time on.
I'm always confused when an otherwise sane company starts playing with this type of financial engineering, the only people who really seem to profit will be the team who manages the split - and I often wonder whether a split is just some way of rewarding them with business, in return for some type of off books advantage.
Is there any other rational reason why a company might want to split? Does it give them some way of controlling their shares more effectively by splitting them -I.E. When the stock splits, do they get an enumeration of their shareholders that they might not otherwise have?
Anybody been involved in a stock split that can explain what the behind the scenes reasons totally not related to the "stock is cheaper so more people can buy it" excuse is?"