The day has finally arrived: Apple Inc. (NASDAQ:AAPL) executed a seven-for-one stock split Monday, bringing its once-lofty share price into the desired sub-$100 range in a bid to attract investors to the iPad and iPhone maker.
Apple shares have risen 25 percent since the spilt was announced in April, outpacing by far the S&P 500's 4 percent gain over the same period.
“The reason has more to do with psychology than logic,” ABC News reports. “Even though the company's market value remains the same, the prospect of a lower price per share often excites investors who previously shied away from a stock because it looked too expensive.”
A stock split increases the number of a company's shares outstanding by giving shareholders a set number of shares for each of their existing shares. In Apple's case, shareholders got seven shares for each of their existing shares.
So if the stock split doesn’t actually mean that the price will rise, why has the price risen in the past six weeks?
Splitting the stock may attract new investors who wouldn't take a risk on a $500 stock but might take a shot at a sub-$100 share. Current investors see these new investors as an influx of money, making Apple worth more in their eyes, which in turn boosts the company's value. The 25 percent increase has created over $100 billion worth of shareholder money. The 7:1 split is the first split for Apple in nine years.
The increase in value post-announcement has brought the share price very close to Apple’s historic high of $100.01, on a split-adjusted basis. Apple climbed to this high just after Cook began doling out dividends in 2012, but it started to slump just after the iPhone 5 was announced that year, bottoming out at $390.
Considering this track record and the positive reaction to Apple's announcements at WWDC last week, its shares could continue to climb in the next few months and top out just before the iPhone 6 release this September. If history repeats itself, investors could see a record high in the next few months, followed by a fairly decent crash.
Speculation aside, Apple shareholders have made a lot of money in the last month and a half, which is good for them and good for Apple.
The shares closed Friday at $645.54, and adjusted for the split, opened at $92.22 on Monday morning.