Alphabet this week announced that its board approved a 20-for-1 stock split, meaning that shares of the Google parent company will soon be trading at a much cheaper price.
Existing shareholders will receive 19 additional shares for every share they already own.
This means that an investor who owned 100 shares will now own 2,000, but the total value of their holding will remain the same. (CNBC)
What exactly is a stock split?
Put simply, a stock split is when a company divides up its shares to lower the price and increases the overall amount of shares available. A company usually undergoes a stock split when the price of its shares has gotten very high.
If a company whose shares cost ETB 1,000 a piece underwent a 2-for-1 stock split, the overall amount of shares would double while the price of each share would drop to ETB 500.
An investor who owns 100 shares in this fictional company would still have ETB 100,000 worth of stock, but would own 200 shares instead.
Why did Alphabet split its stock?
At nearly $3,000 per share, Alphabet has one of the priciest stocks in Silicon Valley.
The company’s chief financial officer Ruth Porat indicated that the move will allow more people to
invest in the company.
“The reason for the split is to make our shares more accessible,” she said on a Tuesday conference call. “We thought it made sense to do.”
