RE:RE:explanationAarman4 wrote: Respectfully fabdaq21, that is correllation, not causation.
Stock splits did not do anything to precipitate a rise in share price, The companies were climbing in value and perceived value, and had they not split, they still would've climbed to the same level. The Market Cap of the company stays the same regardless. If a company is so small that the bulk of it's investor's are retail, and the difference of $30 and $60 makes a difference to the purchasers, then fair enough, that makes sense so it doesn't make it harder for shareholder's to sell by lowering the sotck price and providing more liquidity......... However, a share split still doesn't do anything whatsoever to make the rise in value of your tradign account rise, that was done by the operations of the companies ytou owned(and the excitement of the share buying pool). That is it, that is all.
The liquidity that stock splitting adds traditionally has a "calming" effect on share prices, and reduces the highs and raises the lows, due to each shar being bought and sold now having a smalle rpercentage effect on share price movement, but still, in the end, the company has a market cap, the number of shares and share price has to do with liquidity...... I would argue that there is little to no effect on shareholder buy ins based upon buy price until it hits $100(psychological) or maybe $1000(actually becoming a pain in the butt to buy the amount of shares you want).
Cheers!
Aarman4 is right.
Well said.
As an example, Nortel announced 5 share splits prior to their spectacular collapse followed by a "reverse" share split 1-for-10.
There can be a consistent trend, and forward splits continue but this is never gauranteed.
Banks have done well over the past 40yrs, plenty of splits. Had the financial crisis lasted another year, some banks could have gone to $0. All those splits would have been meaningless. Bank of America is one of those cases. Could have been $0 after 3 forward splits prior to collapse.