But if Amazon and Alphabet wanted to join the Dow, there’s a solution to this price problem: The companies could announce a stock split, which increases the number of shares of the company has while cutting the price of each share to a more affordable level. It wouldn’t change the companies’ value.
Beyond the Dow question, splits can be compelling because some experts argue that having a more affordable price for a single share could attract even more investors. But that’s admittedly less of an issue due to fractional trading, in which investors can buy a small piece of a company’s shares through online brokers like Robinhood, Fidelity or Charles Schwab.
Amazon was not immediately available for comment when asked by Fintech Zoom Business if the company was considering a stock split, while a spokesperson for Alphabet declined to comment.
High profile companies are ‘split’ on whether to split
A Booking spokesperson, when asked by Fintech Zoom Business about a future stock split, said the company has “considered this but have not really seen the need to do so as of now.”
Chipotle chief financial officer Jack Hartung said in an email to Fintech Zoom Business that “we do not have any plans to split our stock at this time, but if we see an opportunity to enhance shareholder value and remove impediments to interested investors owning our stock, we will discuss the opportunity with our Board.”
AutoZone was not immediately available for comment.
“The share split will encourage greater liquidity for CP’s common shares and provide enhanced opportunities for ownership by a wider group of investors,” said chief financial officer Nadeem Velani in a recent conference call with analysts.
More trouble than they’re worth?
Not all company leaders are on board with stock splits. At least one major CEO has publicly called them a waste of time.
“At one time, the conventional thinking was that when a company’s share price got to a certain level, the company would split the stock as a way of foreshadowing expectations of growth and in order to make it more affordable for retail shareholders,” he said.
But Demchak added that “all the stock split really does is increase costs because it doubles the cost of the mechanics that go into servicing every share.”
“The split might result in some positive short-term public relations that brings about maybe a short-term bump,” he added. “But long term, it would appear that the cost is more than it’s worth.”