20:1 Google stock split … what does it mean for investors?

At Alphabet’s (Google) recent earnings call they announced a 20/1 stock split. 

What does the Google Stock Split mean for investors?

For every one share of Alphabet (Google) that you own on July 15th 2022 you will receive 19 additional shares. 

But before you get too excited it doesn’t mean that your share holdings is twenty times more valuable. Here is how it works….. 

As I write this GOOGL (Alphabet) is trading at $2,583. If you own 1 share of GOOGL the value of your shareholding is $2,583. On July 15th instead of owning one share you will own twenty shares but the share price will be 1/20th of what it traded at on the previous day. 

Using today’s share price as an example, if GOOGL split tomorrow instead of having one share at $2,583 you will own 20 shares at $129.15 ($129.15*20 = $2,583). 

As you can see you will be no better or worse off from a valuation perspective as a result of the stock split.  

Some argue that it helps the share price as more retail investors get involved in stocks that may have been previously out of their reach. For example, before Apple split 7:1 in 2014 the stock rose 15% in the 3 weeks leading into the stock split. However, there is no science as to whether or not stock splits lead to higher share prices.

We like Alphabet (GOOGL) and love the idea of the stock split. The reason being is that it makes it easier for people to buy the stock at $100 or more as opposed to $2,500. Also, it makes is easier for us to generate monthly premiums using options on smaller trading accounts. 

Happy Investing

Stephen 

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