4 min read

Alphabet’s Stock Split

The stock market has taken a hit in the last few days, as the latest consumer price index report11 came in hotter than expected, rising 9.1% from a year ago. To help ease the pain, Alphabet’s much awaited 20-for-1 stock split took place after market close on Friday.

Alphabet’s shares have been on a roller coaster ride since the pandemic. The stock split will give Alphabet the chance to make its shares more accessible.

Stock split details

On 01 June, Alphabet’s shareholders approved the request for a 20-for-1 stock split at its annual shareholder meeting. The split intends to reduce the company’s share price from $2,000+ to just above $100.

A stock split occurs when a company issues additional shares, increasing the total by the specified ratio based on its current holdings. Companies often split their stock to make their share price more attractive to a range of investors, which can increase its volume of trading. However, the overall value of the company is unchanged; there are just more shares available with a lower share price.

Stock splits don’t always affect a company’s share price, but,, when companies announce plans to split shares, it can sometimes result in favourable moves for the company’s share price.

To participate in the Alphabet’s stock split, investors must own shares in the company before market close on Friday, 15 July. However, the actual split will only reflect on Monday, 18 July. This allows brokers sufficient time to process share-balance changes and prepare for post-split trading as well as helping Alphabet give itself an opportunity to prove that it can keep its engines going after the split, and to get its stock price moving back in an upward direction.

Popularity

Alphabet isn’t the only company to announce a stock split recently—several notable companies, from a range of industries, have made similar announcements, including Tesla (TSLA, $)1, e-commerce company Shopify ($SHOP)2, and high-end furniture retailer RH ($RH,)3.

Fundamentals

Before purchasing a stock, it’s always a good idea to review the company’s fundamentals; this will give you an idea of how well the company is performing.

As for Alphabet, the company remains a leader in its industry, holding approximately $140 billion in liquidity at the end of the first quarter of 20224 — the company is the eighth largest American company by revenue5. Its current annual sales total is $136 billion, which is a few billion dollars more than the combined total sales of Ford and General Motors6. And Alphabet’s not done growing: it’s increasing revenue by 23% year over year7.

Alphabet dominates the digital advertising market, with 27%8 market share in the digital advertising industry. If you use any of Alphabet’s apps or services—like YouTube, Gmail, or Google Search—the chances are good that you’ll see an ad and that’s how Alphabet makes money.

The stock market has had choppy performance so far, with the tech-focused Nasdaq deep into bear market territory, down 28.11% YTD9. Alphabet’s stock has performed slightly better than the overall market this year, falling about 22.46%10 in value; however, regardless of what impact the split has on the stock price in the near term, investors might want to do their homework on Alphabet’s financials before deciding to invest in it.

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Past performance is no guarantee of future results. Your investment can fluctuate, so you may get back less than you invested. Consider each product’s risk(s) before investing. Baraka is not a financial adviser and therefore does not provide financial advice. Our content is informational only.


1 https://www.cnbc.com/2022/06/10/tesla-files-for-3-for-1-stock-split.html
2 https://www.nasdaq.com/articles/shopifys-stock-split-is-complete-but-this-is-the-real-reason-to-buy-the-stock
3 https://ir.rh.com/news-releases/news-release-details/rh-announces-intention-execute-3-1-stock-split
4 https://www.msn.com/en-us/money/topstocks/better-advertising-stock-alphabet-vs-amazon/ar-AAZss4I
5 https://fortune.com/company/alphabet/fortune500/
6 https://www.fool.com/investing/2022/06/20/alphabets-stock-split-the-real-reason-it-matters/
7 https://www.msn.com/en-us/money/topstocks/better-advertising-stock-alphabet-vs-amazon/ar-AAZss4I
8 https://www.fool.com/investing/2022/06/20/alphabets-stock-split-the-real-reason-it-matters/
9 https://money.cnn.com/quote/quote.html?symb=COMP.IDX
10 http://com/quote/quote.html?symb=goog
11 https://www.bls.gov/news.release/cpi.nr0.htm
Iman Haider
4 min read