What is a stock split?
A stock split is when a company divides its existing shares, causing the stock available to increase. As a result, the price of each share is reduced without impacting the overall value of the business.
For example, a 2-for-1 stock split would mean every existing investor will receive 2 shares for each 1 they already own. If they held 10 shares before the stock split, they would have 20 shares after the split is completed.
Although each individual share would be worth less after the split, shareholders won’t lose any capital. For example, if the share price before the 2-for-1 split was £10 per share, then afterward the shareholder would have two shares at £5 each.
Learn more about stock splits.
Google 20-for-1 stock split
Alphabet (GOOGL) announced a 20-for-1 stock split. The company also recently announced a new stock buyback program, with plans to repurchase up to an additional $70 billion of its own shares.
As mentioned, stock splits often make previously ‘expensive’ shares more attractive to retail investors and this is likely to be the case for GOOGL given the popularity of the brand and reputation of the stock.
Alphabet, which is the parent company to Google, is a global leader in digital platforms and advertising. It owns a huge array of brands including Chrome, Android, Google Search, Google Maps, Gmail and YouTube.
Alphabet’s 230+ companies are divided into three business segments: Google Services, Google Cloud and Other Bets – which is a combination of earlier-stage businesses that are not yet individually generating enough revenue alone.
Find out more about Google’s acquisition history.
In its March earnings, Alphabet’s reported sales were up 23% year-over-year, its slowest growth rate since 2020. Management attributed the slowdown to rising inflation, supply-chain disruptions, and the Russian invasion of Ukraine, which have collectively dampened the spending of advertisers. Net income declined 8%, falling short of analyst estimates.
When is the Google stock split?
The Alphabet stock split will be issued on July 15 2022. Shareholders of Alphabet Inc voted to approve the stock split at the company's annual general meeting on June 1. On the 15 July, each shareholder will then own 20 shares for each single share they held before that date.
Why is Alphabet conducting a stock split?
Alphabet is splitting its stock to make its shares more accessible to retail investors, a vital source of capital. Based on its most recent closing price of $2,288 on May 17, Alphabet stock would trade at about $114.4 per share post-split.
Research from Bank of America also suggests that stock splits have historically been bullish for companies that complete them and that they tend to outperform the wider market during the 12 months after the split has happened.
The below shows the bank’s research on the average returns delivered by companies that have split their stock since 1980 compared to the S&P 500, based on the 3-months, 6 months and 12 months after a split has been completed:
|Average Returns||3 Months||6 Months||12 Months|
(BofA Global Research)
Other Big Tech stock splits
Amazon also announced plans for a 20-for-1 stock split that will be completed later this year, while Apple, Tesla and NVIDIA are among other major players to have conducted stock splits since the start of 2020.
See our guide to Amazon’s stock split.
How to trade the Alphabet stock split
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