Author Topic: Stock splits  (Read 3928 times)

Offline Calvin Wong

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Stock splits
« on: June 09, 2006, 06:49:09 PM »
Dear investment gurus,

I wonder if you can help me out here.

I read recently that my company underwent some stock splits during its peak... I'm very confused over this... what exactly is a stock split and why on earth would any company want to half the value of its shares?

Thanks.

Offline julez.lim

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Re: Stock splits
« Reply #1 on: June 12, 2006, 04:27:06 PM »
This is some little info I know bout stock split...
Disclaimer: Some terms I use may not be accurate as I am a practical fella and not a theory fella

What happens after stock split:
1. Share price reduced
2. Share value reduced

If a stock cost RM40, would you or can you buy it? The entire share, I mean... So, stock split is sometimes good as it reduces the stock price and enabling small fishes like me to purchase them...

On thing to note is that the share value dropped also... If split by 2, RM1 share will reduce to 50 cents share

Offline itoslemma

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Re: Stock splits
« Reply #2 on: June 12, 2006, 04:48:30 PM »
the purpose of a stock split is to improve liquidity via affordability. thats the key. while it improves liquidity, current stockholders will not have to worry about their holdings as the proportion they hold will remain the same relative to the market cap.

Offline Calvin Wong

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Re: Stock splits
« Reply #3 on: June 14, 2006, 07:49:53 AM »
Sorry ya, i still don't quite understand...

If a RM1 stock is split by 2, then the shareholders will have the values of each share halved, but they will receive double the units. Is this correct?

How will this be reflected in the stock market charts?

Offline Calvin Wong

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Re: Stock splits
« Reply #4 on: August 28, 2006, 05:32:12 PM »
Sorry ya, this might be a stupid question but let me ask again.

If a stock is split, how will it reflect in the stock charts? Like if a stock is split into 2, will it show as a 50% drop in the charts?

Thanks.

Offline Maxforce

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Re: Stock splits
« Reply #5 on: August 28, 2006, 07:54:06 PM »
Theoritically when it split into 2, the price will drop 50%.
Hence shareholders wealth do not change
But as we can see in reality, it does not happen that way.
Five points a day, keeps you out of harm's way.

Offline Calvin Wong

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Re: Stock splits
« Reply #6 on: August 29, 2006, 10:06:26 AM »
Theoritically when it split into 2, the price will drop 50%.
Hence shareholders wealth do not change
But as we can see in reality, it does not happen that way.

What happens in reality?

Offline itoslemma

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Re: Stock splits
« Reply #7 on: August 29, 2006, 05:07:03 PM »
theoretically prices would fall with the maginitude determined by liquidity  :)

Offline Maxforce

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Re: Stock splits
« Reply #8 on: August 29, 2006, 08:39:30 PM »
what happens is this.
When news of split comes, share price rally to new highs
then split happens but drop less than 50% of the new high.
But more than 50% of original price.
Then stock recovers due to better liquidity to its original price.
Five points a day, keeps you out of harm's way.

Offline julez.lim

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Re: Stock splits
« Reply #9 on: August 30, 2006, 08:46:20 AM »
Sometimes after stock split, the share price will rise (like 1 plantation company... forgot it's name oledi).
But some stays dormant (Globetronics)

But they are like that also because of a few other issues...