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Calculating Stock Splits

Calculating Stock Splits

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Calculating Stock Splits

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  1. Calculating Stock Splits Mrs. Matiste

  2. Why do corporations split stock? • Increases the number of shares outstanding • Decreases the market price per share • Stock is reduced proportionately to the new number of outstanding shares • Done to allow average stock buyers to afford stock • Or to increase the supply of stock • All new shares are distributed to existing stockholders • The corporation DOES NOT make money on stock splits

  3. Stock Splits • In order to receive the split shares, you need not own the stock on the day of the split, you must own it WHEN THE SPLIT OCCURS! • Example: On April 20, XYZ Corporation announces a 2 for 1 stock split to occur on June 1. In order to get the split shares, you only have to own the stock prior to June 1st.

  4. Who Makes Money When A Stock Splits? Nobody!

  5. How IS Money Made When A Stock Splits? When Price/Share Goes Up!

  6. Summary of Splits • 2 for 1 = 2 • 3 for 1 = 3 • 4 for 1 = 4 • 5 for 4 = 1.25 • 3 for 2 = 1.5 • 1 for 2 = .5 • 1 for 4 = .25

  7. 2 for 1 – You would end up with twice as many shares as you had owned and the price would be divided by 2 3 for 1 – You would end up with three times as many shares as you had owned and the price would be divided by 3 Reverse Split – Decreases the number of shares and increases the market price per share (USUALLY A BAD SIGN) Causes 1) # of shares to decrease 2) Price/share to increase ½ for 1 – You would end up with one half as many shares as you had owned and the price would be multiplied by 2

  8. Reverse Split • 1 for 5 Reverses Split • Had 500 Shares • Split at $1.30 per share • 500 / 5 = 100 • 1.30 x .5 = 6.50

  9. Stock Split Problems • Fun Corp. decides on a 2 for 1 split of its stock. You own 92 shares on the day of the split. The stock splits at a price of $75.56 per share. • How many shares do you own after the split? • 92 shares x 2 = 184 shares • What is the new price/share after the split? • $75.56 / 2 = $37.78/share • How much money did you make on the split? • NONE

  10. Stock Split Problems • Zero Corp. decides on a 3 for 1 stock split in order to reduce the price of their stock. You happen to be the proud owner of 200 shares of Zero Corp. The stock splits at a price of $108.75. • How many shares do you own after the split? • 200 shares x 3 = 600 shares • What is the new price/share after the split? • $108.75 / 3 = $36.25/share • How much money did you make on the split? • NONE • How much money did Zero Corp. make on the split? • NONE

  11. Stock Split Problems • XYZ Corp. decides on a 5 for 1 split of its stock. You own 35 shares on the day of the split. The stock splits at a price of $250 per share. • How many shares do you own after the split? • 35 shares x 5 = 175 shares • What is the new price/share after the split? • $250.00 / 5 = $50.00/share • How much money did you make on the split? • NONE • How much money did Zero Corp. make on the split? • NONE

  12. Stock Split Problems • XYZ Corp. decides on a 3 for 2 split of its stock. You own 20 shares on the day of the split. The stock splits at a price of $84.00 per share. • How many shares do you own after the split? • 20 shares x 1.5 = 30 shares • What is the new price/share after the split? • $84.00 / 1.5 = $56.00/share • How much money did you make on the split? • NONE

  13. Stock Split Problems • Mo Corp. decides on a 5 for 4 split of its stock. You own 200 shares on the day of the split. The stock splits at a price of $98.00 per share. • How many shares do you own after the split? • 200 shares x 1.25 = 250 shares • What is the new price/share after the split? • $98.00 / 1.25 = $78.40/share • Who made money on the split? • NOBODY

  14. Stock Split Problems • Kiddie Corp. has 1,500,000 shares of its outstanding (as in issued and not exceptional) and decides on a 3 for 1 split. The stock splits at $108.75. • How many shares of Kiddie are now outstanding? • 1,500,000 shares x 3 = 4,500,000 shares • What is the new price/share after the split? • $108.75 / 3 = $36.25/share • How much did Kiddie make on the split? • NOTHING

  15. Stock Split Problems • Axle Corp. decides on a 3 for 2 split. You own 500 shares of Axle. It splits at a price of $82.50. • How many shares of Axle do you now own? • 500 shares x 1.5 = 750 shares • What is the new price/share after the split? • $82.50 / 1.5 = $55.00/share • How much did Axle make on the split? • NOTHING

  16. Stock Split Problems • Nutso Corp. decides on a 2 for 1 stock split. You own 75 shares of Nutso. It splits at a price of $39.50. • How many shares of Nutso do you now own? • 75 shares x 2 = 150 shares • What is the new price/share after the split? • $39.50 / 2 = $19.75/share

  17. Stock Split Problems • Krumbum Corp. decides on a 3 for 2 stock split. You own 275 shares of Krumbum. It splits at a price of $108.00. • How many shares of Krumbum do you now own? • 275 shares x 1.5 = 412.5 shares • What is the new price/share after the split? • $108.00 / 1.5 = $72.00/share

  18. Stock Split Problems • Wacko Corp. decides on a 5 for 4 stock split. You own 50 shares of Wacko. It splits at a price of $285.50. • How many shares of Wacko do you now own? • 50 shares x 1.25 = 62.5 shares • What is the new price/share after the split? • $285.50 / 1.25 = $228.40/share