so i have a question about splitting... what about a company giving u the 1:2 ratio meaning takes 1/2 ur shares and the rest are more expencive... i have not seen any companies do it but would that be good and if so what would it mean for the company... chahine
The big thing on a 1:2 split would be to make it have a higher price. That ones pretty obvious. But there are some other reasons behind it, too. The company could be trying to consolidate its ownership it is alot easier to buy 1000 shares at 5 then 2000 shares at 2.5. Unfortunately, an issue that this raises is that it also becomes a whole lot easier for another company to do a hostile takeover. That answer your question?
well it does make sense and i think i see the reasoning behind it... thnx chahine
That's a reverse split. Tons of crappy companies do it. People psychologically don't like buying stocks under a certain amount of money. When companies dip to low in stock price they will do a reverse split. Example of 1 for 5 reverse split: Your .25 cent stock becomes a $1.25 stock. They can get listed on a stock exchange again. And they can lure more investors in before their fundamental problems drag them down to the bottom again.
Why is splitting necessarily better for shareholders? OK, so you have twice as many shares, but so what? A percentage gained is a percentage gained... it doesn't matter if the company gains 10 bucks when its at 60 with you holding 100 shares then if it gains 5 bucks when its at 30 with you owning 200 shares. Its the same thing so why is it so good? Does the price have a habit of shooting up after or right before splitting?
You get more shares (which is good) after a split they also tend to go back up, which is also good. If you are a long term investor in stocks that split, it is another way to have more shares. A lot of companies that split oftentimes pay out dividends, which is another good way to make $$. Hope this helps explain a bit..
Yes it does, but i've seen that dividends (at least in UNH case) are quite low. I think it was 0.04 cents for a 60 dollar stock, meaning lets say I own 17 stocks, give me a whole 68 cents! Maybe I thew an extra zero in there in my head but I dont think I did...
Most companies with solid growth will usually only pay small dividends rather than large ones. They can make more money re-investing it in the business than paying it out to shareholders.
Splits are often done to keep a companies stock price attractive to individual investors. After a split, there are more shares outstanding, but the total market value remains the same. So just a further explanation.. :)