| | | Of course - companies that split generally do so because their share price has increased markedly. … I see you are a literalist. Let me see if I can give you a literal interpretation.
The market, along with the rest of the world, is a chaotic web of causal links. Appreciation (pre decision to split) in share price is not that much a factor in the decision to split a stock. There are many reasons to do so. AAPL has been higher than $700, but April 23, 2014 is the day they chose to announce a 7:1 split. That day, it closed at $524.75. So, to say that companies generally do so (split their stock) because their share price has increased is misleading if not outright faulty logic.
Companies generally split their stock when it is above $100 a share and the management's expectation is for further sustainable appreciation, as well as other factors. That means that post 'split announcement' profits can be anticipated and acted on in a timely manner. In this case, the announcement was after the bell and the stock opened higher the next day. So, buying post announcement does sacrifice some of the capital gains, but there was (and usually is) still plenty of room to run.
The market is inefficient. One way to capitalize on market moves is to recognize pricing displacement and invest to participate in its correction. The point in time where a split in a popular stock becomes known is by its very nature a disruption to pricing efficiency. |
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