On February 1st, 2022, Alphabet announced plans to enact a 20-to-one stock split on July 15, giving each shareholder 19 shares for every one share they currently hold. Trading will start on a split-adjusted basis on July 18th.
The split was announced after market close on Tuesday in tandem with their fourth quarter earnings report, which outperformed analysts expectations.
Alphabet’s stock price rose approximately 65% last year, marking the third consecutive year the company has seen a double digit increase in its share prices. On February 1st, the company announced that it nearly doubled profit over 2021.
Opening the door to retail investors
The split could potentially make Alphabet’s stock a more enticing option for small retail investors who couldn’t afford to purchase shares at its current valuation of nearly $3,000. While some brokerages like Robinhood allow the purchase of fractional shares, not all brokerage firms have adopted this practice, meaning the stock could reach a much wider retail audience.
If the split were to occur at Tuesday’s market closing price, each Class C share of Alphabet stock would trade at roughly $137.
Alphabet’s stock was last split back in 2014, giving each shareholder one additional share per one they held.
What the split means for large investors
For larger investors, the split is less of a concern; after the split, the lower price per share is negligible due to the increase in shares. The split will affect all three classes of Alphabet stock.
The move could also allow Alphabet’s stock to enter the Dow Jones index, something it couldn’t have done prior to the split due to the index’s old fashioned price weighting.
Even with the general market sentiment skewing bearish in anticipation of the Federal Reserve raising rates in 2022, Alphabet has fared better than most; January marked the worst month for the market since the first month of the pandemic. Alphabet’s shares, however, are only trading down approximately 5% over the last month.
Who’s next
Analysts predict that Alphabet’s move could prompt Amazon to consider a stock split as well, who hasn’t split its stock since 1999; its shares are currently trading at $3,023 at the time of writing.
Dil Bole Oberoi
