Palo Alto Networks split yesterday. Is it the right time to buy more?
Hi my friend. I can’t give individual investing advice. That said, a stock split is a largely meaningless event.
Say a company had 10 shares of stock, and those shares traded at $10,000 per share. It would have a market capitalization of $100,000.
If it split those shares 100 to 1, it would then have 1,000 shares, trading at $100 per share. Or in other words, it would still have the same $100,000 market capitalization.
Stock splits used to matter more, before the days of partial shares and commission-free trading. Back in those days, splits helped with making shares accessible to smaller investors and improving the granularity with which existing shareholders could raise cash by selling shares.
These days, splits really only make stock options more accessible for outside investors who want to invest that way. This is because publicly traded options still typically operate in 100-share lots.
Regards,
-Chuck
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Hey there Jodibackst. Welcome to Fooldom.
Your question is simple, but the answer to it never is. The point of a split has nothing to do with giving you a better opportunity. The reason a stock splits is to give the company more exposure. (Some times they can’t get into an index list if price too high, some times they claim ‘more’ private investors could afford to buy, etc)
The real reason for a stock split, in this day and age, is window dressing. (Actually, a thought just popped into my head, could also do with stock based compensation [SBC]. This way they are paying employees less…hmmm.)
Anyway, a stock split has nothing to do with giving you a better chance. You are still buying the same company for the same price a you would have before the split. If you can buy fractional shares (most brokerages allow you to) then you could have the exact same amount, only now it looks like a whole share instead of a partial.
There are sometimes reasons to buy post split, but those are in the realm of day trading and not investing.
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