What in tarnation is a stock split?

Last Stonk Enjoyer for a while. Much love and appreciation.

Hello, and sorry for the major delay of release.

👉Life Update/Programming Note:

I recently got engaged to an amazing man and am soon to be Mrs. Stonk Enjoyer🥂

With that, it is bittersweet to share that Stonk Enjoyer will be on pause for the time being so I can focus on exciting new developments in both my career and my relationship.

We will re-evaluate in 2025 if I can continue to make excellent content for y’all.

Along with wedding planning, I recently accepted a new job at a Fintech called Arc, on their Go-To-Market team… so a lot of big life changes.

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I started Stonk Enjoyer to write about personal portfolio topics in a funny, but educational way to lower the intimidation barrier to entry of investing. I feel like I got to cover all of the topics I wanted to address and loved getting to talk to so many interesting people along the way.

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This is not investment advice and is intended for entertainment purposes only.

What in tarnation is a stock split?

A big $NVDA stock split occurred on June 10th, so I thought we’d dive into my favorite involuntary corporate action today.

Stock splits.

From Robinhood via in-app communications:

“The number of shares you hold will increase by 10x, and the price per share will decrease by 10x. As a result, the collective value of NVDA shares will remain the same. These changes will be reflected in your account by the start of pre-market hours, 4 AM ET on Monday, June 10.”

But first, what is a corporate action?

A corporate action is an event initiated by a public company that brings about a change to its securities, impacting the shareholders.

Some common corporate actions include dividends, buybacks, mergers and acquisitions, stock splits, etc.

A corporate action can be involuntary, which means you don’t get a say in it as a shareholder - it just happens and is reflected in your account.

It can also be voluntary which means you as the shareholder have the decision but not the obligation to participate. Examples of these are tender offers, rights issues, and exchange offers.

Since a stock split is involuntary, once the decision is made by the board of directors, it is what it is.

Stock Splits

The action itself causes a change in the number of outstanding shares or affects the stock price.

There are two types of splits:

  1. Forward Stock Split: In a forward stock split, each existing share is divided into multiple shares.

    👉For example, in a 2-for-1 stock split, a shareholder who owns 1 share would receive 1 additional share, resulting in 2 shares in total. The share price is adjusted accordingly. If a stock was trading at $100 before a 2-for-1 split, it would trade at $50 after the split.

  2. Reverse Stock Split: In a reverse stock split, multiple existing shares are combined into a smaller number of shares. This is often done to increase the stock price and make it more attractive to investors, especially if it is trading at a very low price.

    👉For example, in a 1-for-10 reverse split, a shareholder who owns 10 shares would end up with 1 share. If a stock was trading at $1 before a 1-for-10 reverse split, it would trade at $10 after the split.

Life After the Split

So if you hold $NVDA or any other stock that may undergo a stock split, it doesn’t technically change anything to your holdings. But since market sentiment is key, price changes can sway demand and cause the ticker to move.

Meme of the Week (self-five)

Credit to me lol